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					                                       IMPORTANT NOTICE

NOT FOR DISTRIBUTION TO ANY U.S. PERSON OR TO ANY PERSON OR ADDRESS IN THE
UNITED STATES.

IMPORTANT: You must read the following before continuing. The following applies to the offering
circular following this page, and you are therefore advised to read this carefully before reading, accessing
or making any other use of the offering circular. In accessing the offering circular, you agree to be bound
by the following terms and conditions, including any modifications to them any time you receive any
information from us as a result of such access.

NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF NOTES FOR SALE
IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE
NOTES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE SECURITIES ACT), OR THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR OTHER JURISDICTION AND THE NOTES MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS
DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT TO PERSONS IN OFFSHORE
TRANSACTIONS IN RELIANCE ON REGULATION S UNDER THE SECURITIES ACT.

THE FOLLOWING OFFERING CIRCULAR MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY
OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND IN
PARTICULAR, MAY NOT BE FORWARDED TO ANY U.S. PERSON OR TO ANY U.S. ADDRESS. ANY
FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART
IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION
OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. IF YOU HAVE
GAINED ACCESS TO THIS TRANSMISSION CONTRARY TO ANY OF THE FOREGOING
RESTRICTIONS, YOU ARE NOT AUTHORISED AND WILL NOT BE ABLE TO PURCHASE ANY
OF THE NOTES DESCRIBED IN THE ATTACHED DOCUMENT.

Confirmation of your Representation: In order to be eligible to view this offering circular or make an
investment decision with respect to the notes, investors must not be U.S. persons (within the meaning of
Regulation S under the Securities Act). This offering circular is being sent at your request and by accepting
the e-mail and accessing this offering circular, you shall be deemed to have represented to us that (1) you
are not a U.S. person nor are you acting on behalf of a U.S. person, the electronic mail address that you
gave us and to which this e-mail has been delivered or being accessed is not located in the United States
and, to the extent you purchase the notes described in the attached document, you will be doing so pursuant
to Regulation S under the Securities Act and (2) you consent to delivery of such offering circular and any
amendments and supplements thereto by electronic transmission.

You are reminded that this offering circular has been delivered to you on the basis that you are a person
into whose possession the attached offering circular may be lawfully delivered in accordance with the laws
of the jurisdiction in which you are located and you may not, nor are you authorised to, deliver the attached
offering circular to any other person.

The materials relating to the offering do not constitute, and may not be used in connection with, an offer
or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires
that the offering be made by a licensed broker or dealer and any of the underwriters or any affiliate of the
underwriters is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by
such underwriter or such affiliate on behalf of Industrial and Commercial Bank of China Limited, Singapore
Branch in such jurisdiction.

The following offering circular has been sent to you in an electronic form. You are reminded that documents
transmitted via this medium may be altered or changed during the process of electronic transmission and
consequently Standard Chartered Bank or any person who controls it or any of its affiliates’ directors,
officers, employees or agents accepts any liability or responsibility whatsoever in respect of any difference
between the offering circular distributed to you in electronic format and the hard copy version available to
you on request from Standard Chartered Bank and/or Industrial and Commercial Bank of China Limited,
Singapore Branch.

Your use of this e-mail is at your own risk and it is your responsibility to take precautions to ensure that
it is free from viruses and other items of a destructive nature.

Actions that you may not take: If you receive this document by e-mail, you should not reply by e-mail,
and you may not purchase any securities by doing so. Any reply e-mail communications, including those
you generate by using the “Reply” function on your e-mail software, will be ignored or rejected.
OFFERING CIRCULAR                                                                                       CONFIDENTIAL




    INDUSTRIAL AND COMMERCIAL BANK OF CHINA
           LIMITED, SINGAPORE BRANCH
 (a joint stock limited company incorporated in the People’s Republic of China with limited liability)

                                                 US$300,000,000
                                Euro Medium Term Note Programme


Under this US$300,000,000 Euro Medium Term Note Programme (the Programme), Industrial and Commercial Bank of China
Limited, Singapore Branch (the Issuer or the Bank), may from time to time issue notes (the Notes) denominated in any currency
agreed between it and the relevant Dealer (as defined below).

Notes may be issued in bearer or registered form (respectively Bearer Notes and Registered Notes). The maximum aggregate
nominal amount of all Notes from time to time outstanding under the Programme will not exceed US$300,000,000 (or its
equivalent in other currencies calculated as described in the Programme Agreement described herein), subject to increase as
described herein.

The Notes may be issued on a continuing basis to one or more of the Dealers specified under “Overview of the Programme”
and any additional Dealer appointed by the Bank under the Programme from time to time (each a Dealer and together the
Dealers), which appointment may be for a specific issue or on an ongoing basis. References in this Offering Circular to the
relevant Dealer shall, in the case of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all
Dealers agreeing to subscribe such Notes.

An investment in Notes issued under the Programme involves certain risks. For a discussion of these risks see “Investment
Considerations”.

Application will be made to the Singapore Exchange Securities Trading Limited (the SGX-ST) for permission to deal in and
quotation of any Notes that may be issued pursuant to the Programme and which are agreed at or prior to the time of issue
thereof to be so listed on the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made
or opinions expressed or reports contained herein. The approval-in-principle from, and the admission of any Notes to the
Official List of, the SGX-ST is not to be taken as an indication of the merits of the Bank, the Programme or the Notes. Unlisted
Notes may be issued under the Programme. The relevant Final Terms (as defined below) in respect of any Series (as defined
in “Terms and Conditions of the Notes”) will specify whether or not such Notes will be listed and, if so, on which exchange(s)
the Notes are to be listed. There is no assurance that the application to the Official List of the SGX-ST for the listing of the
Notes of any Series will be approved.

Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and
any other terms and conditions not contained herein which are applicable to each Tranche (as defined under “Terms and
Conditions of the Notes”) of Notes will be set out in a final terms document (the Final Terms) which, with respect to Notes
to be listed on the SGX-ST will be delivered to the SGX-ST before the listing of Notes of such Tranche.

The Programme provides that Notes may be listed or admitted to trading, as the case may be, on such other or further stock
exchanges or markets as may be agreed between the Bank and the relevant Dealer. The Bank may also issue unlisted Notes
and/or Notes not admitted to trading on any market.

The Notes have not been and will not be registered under United States Securities Act of 1933, as amended (the Securities Act)
or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold
or delivered within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws. See “Form of the Notes” for a description of the manner
in which Notes will be issued. Registered Notes are subject to certain restrictions on transfer, see “Subscription and Sale”.

The Bank may agree with any Dealer that Notes may be issued in a form not contemplated by the Terms and Conditions of the
Notes herein, in which event a supplemental Offering Circular, if appropriate, will be made available which will describe the
effect of the agreement reached in relation to such Notes.

                                                  Sole Arranger and Dealer




                             The date of this Offering Circular is 25 March 2011.
The Bank accepts responsibility for the information contained in this Offering Circular. To the best
of its knowledge (having taken all reasonable care to ensure that such is the case) the information
contained in this Offering Circular is in accordance with the facts and does not omit anything likely
to affect the import of such information.

This Offering Circular has been prepared by the Bank for use in connection with the offer and sale
of the Notes outside the United States. The Bank and the Dealers reserve the right to reject any offer
to purchase the Notes, in whole or in part, for any reason. This Offering Circular does not constitute
an offer to any person in the United States. Distribution of this Offering Circular by any non-U.S.
person outside the United States to any U.S. person or to any other person within the United States,
is unauthorised and any disclosure without the prior written consent of the Bank of any of its contents
to any such U.S. person or other person within the United States, is prohibited.

Subject as provided in the applicable Final Terms, the only persons authorised to use this Offering
Circular in connection with an offer of Notes are the persons named in the applicable Final Terms as
the relevant Dealer or the Managers, as the case may be.

Copies of Final Terms will be available from the Bank’s registered office and the specified office set
out below of each of the Paying Agents (as defined below).

This Offering Circular is to be read in conjunction with all documents which are deemed to be
incorporated herein by reference (see “Documents Incorporated by Reference”). This Offering
Circular shall be read and construed on the basis that such documents are incorporated and form part
of this Offering Circular.

To the fullest extent permitted by law, none of Standard Chartered Bank (the Arranger), the Dealers,
or the Agent, the Registrar or the Paying Agent (as defined below) accepts any responsibility or
liability for the contents of this Offering Circular, for the information incorporated by reference into
this Offering Circular, or for any other statement, made or purported to be made by the Arranger, the
Dealers, the Agent, the Registrar or the Paying Agent or on any of their behalf in connection with the
Bank or the issue and offering of the Notes. The Arranger, each Dealer, the Agent, the Registrar and
the Paying Agent accordingly disclaims all and any liability whether arising in tort or contract or
otherwise which it might otherwise have in respect of this Offering Circular or any such statement.

No person is or has been authorised by the Bank to give any information or to make any representation
not contained in or not consistent with this Offering Circular in connection with the Programme or the
Notes and, if given or made, such information or representation must not be relied upon as having been
authorised by the Bank, the Arranger, the Agent, the Registrar or the Paying Agent or any of the
Dealers. Neither the delivery of this Offering Circular nor any sale made in connection herewith,
under any circumstances, create any implication.

Neither this Offering Circular nor any other information supplied in connection with the Programme
or any Notes (i) is intended to provide the basis of any credit or other evaluation or (ii) should be
considered as a recommendation by the Bank, the Arranger, the Agent or any of the Dealers that any
recipient of this Offering Circular or any other information supplied in connection with the
Programme or any Notes should purchase any Notes. Each investor contemplating purchasing any
Notes should determine for itself the relevance of the information contained in this Offering Circular
and should make its own independent investigation of the Bank’s financial condition and affairs, and
its own appraisal of its creditworthiness. Neither this Offering Circular nor any other information
supplied in connection with the Programme or the issue of any Notes constitutes an offer or invitation
by or on behalf of the Bank, the Arranger, the Agent, the Registrar or the Paying Agent or any of the
Dealers to any person to subscribe for or to purchase any Notes. None of the Dealers, the Arranger,


                                                   2
the Registrar or the Paying Agent, the Agent undertakes to review the financial condition or affairs
of the Bank during the life of the arrangements contemplated by this Offering Circular nor to advise
any investor or potential investor in the Notes of any information coming to the attention of any of
the Dealers, the Arranger, the Agent, the Registrar or the Paying Agent.


Neither the delivery of this Offering Circular nor the offering, sale or delivery of any Notes shall in
any circumstances imply: that there has been no change in the affairs of the Bank, its subsidiaries
and/or associated companies since the date hereof (or the date on which this Offering Circular has
been most recently amended or supplemented); that there has been no adverse change in the financial
position of the Bank since the date hereof (or the date on which this Offering Circular as been most
recently amended or supplemented); that any other information contained herein concerning the Bank
is correct at any time subsequent to the date hereof (or the date on which this Offering Circular has
been most recently amended or supplemented); that any other information supplied in connection with
the Programme is correct as of any time subsequent to the date indicated in the document containing
the same. The Arranger, the Agent, the Registrar, the Paying Agent and the Dealers expressly do not
undertake to review the financial condition or affairs of the Bank during the life of the Programme or
to advise any investor in the Notes of any information coming to their attention.

The Notes have not been and will not be registered under the Securities Act or with any securities
regulatory authority of any state or other jurisdiction of the United States and include Notes in bearer
form that are subject to U.S. tax law requirements. Subject to certain exceptions from the Securities
Act and applicable securities laws, Notes may not be offered, sold or (in the case of the Notes in bearer
form) delivered within the United States or to U.S. persons (as defined in Regulation S). For a
description of certain restrictions on offers and sales of Notes and on distribution of this Offering
Circular, see “Subscription and Sale”.

In the case of any Notes which are to be admitted to trading on a regulated market within the European
Economic Area or offered to the public in a Member State of the European Economic Area in
circumstances which would have required the publication of a prospectus under the Prospectus
Directive (2003/71/EC), the minimum specified denomination shall be = 50,000 or, where the Member
                                                                        C
State in which the offer is being made has implemented Directive 2010/73/EU (the 2010 PD
Amending Directive), = 100,000 (or, in each case, its equivalent in any other currency as at the date
                        C
of Issue of the Notes).

This Offering Circular does not constitute an offer to sell or the solicitation of an offer to buy any
Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such
jurisdiction. The distribution of this Offering Circular and the offer or sale of Notes may be restricted
by law in certain jurisdictions. None of the Bank, the Arranger, the Agent, the Registrar, the Paying
Agent or the Dealers represent that this Offering Circular may be lawfully distributed, or that any
Notes may be lawfully offered, in compliance with any applicable registration or other requirements
in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any
responsibility for facilitating any such distribution or offering. In particular, no action has been taken
by the Bank, the Arranger, the Agent, the Registrar, the Paying Agent or the Dealers which is intended
to permit a public offering of any Notes or distribution of this Offering Circular in any jurisdiction
where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or
indirectly, and neither this Offering Circular nor any advertisement or other offering material may be
distributed or published in any jurisdiction, except under circumstances that will result in compliance
with any applicable laws and regulations. Persons into whose possession this Offering Circular or any
Notes may come must inform themselves about, and observe, any such


                                                    3
restrictions on the distribution of this Offering Circular and the offering and sale of Notes. In
particular, there are restrictions on the distribution of this Offering Circular and the offer or sale of
Notes in the United States, the European Economic Area (including the United Kingdom), Japan, Hong
Kong, Singapore and the People’s Republic of China (the PRC), see “Subscription and Sale”.

In making an investment decision, investors must rely on their own examination of the Bank and the
terms of the Notes being offered, including the merits and risks involved. The Notes have not been
approved or disapproved by the United States Securities and Exchange Commission or any other
securities commission or other regulatory authority in the United States, nor have the foregoing
authorities approved this Offering Circular or confirmed the accuracy or determined the adequacy of
the information contained in this Offering Circular. Any representation to the contrary is unlawful.

None of the Bank, the Arranger, the Agent, the Registrar, the Paying Agent or the Dealers make any
representation to any investor in the Notes regarding the legality of its investment under any
applicable laws. Any investor in the Notes should be able to bear the economic risk of an investment
in the Notes for an indefinite period of time.

   SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES

The Bank is a company incorporated under the laws of the PRC and a substantial majority of its
businesses, assets and operations are located in the PRC. In addition, a substantial majority of the
Bank’s Directors, Supervisors and executive officers reside in the PRC and substantially all of their
assets are located in the PRC. As a result, it may not be possible to serve legal written process outside
the PRC upon the Bank or such Directors, Supervisors or executive officers, including with respect
to matters arising under securities laws of jurisdictions outside the PRC. Moreover, the PRC does not
have treaties providing for the reciprocal recognition and enforcement of judgements of courts with
the United States, the United Kingdom, Japan and many other countries. As a result, recognition and
enforcement in the PRC of judgements of a court in any jurisdiction outside the PRC in relation to any
matter may be difficult or impossible.

        PRESENTATION OF FINANCIAL AND OTHER INFORMATION

The audited financial information included in this Offering Circular relating to the Bank has been
derived from the Bank’s annual financial statements for the financial years ended 31 December 2007,
31 December 2008 and 31 December 2009 (together, the Financial Statements).

The Bank’s financial year ends on 31 December, and references in this Offering Circular to any
specific year are to the 12-month period ended on 31 December of such year. The Financial Statements
have been prepared in accordance with generally accepted accounting principles in the PRC (PRC
GAAP) and also International Financial Reporting Standards (IFRS).

                 CERTAIN DEFINED TERMS AND CONVENTIONS

Capitalised terms which are used but not defined in any particular section of this Offering Circular
will have the meaning attributed thereto in “Terms and Conditions of the Notes” or any other section
of this Offering Circular. In addition, all references to “China” or “the PRC” are references to the
People’s Republic of China. All references to the “Government” are references to the government of
the PRC. References to “United States”, “U.S.”, “U.S.A” or “US” are to the United States of America.
All references to “United Kingdom” herein are to the United Kingdom of Great Britain and Northern
Ireland. References herein to “Renminbi” or “RMB” are to the lawful currency of the PRC, references
to “U.S. dollar”, “U.S. Dollar”, “US Dollar”, “US dollar”, “US Dollars”, “US dollars”, “USD” and
“US$” are to the lawful currency of the United States, and references to “HKD”, “Hong Kong dollars”,


                                                   4
“Hong Kong Dollars”, “Hong Kong dollar”, “Hong Kong Dollar” and “HK$” are to the lawful
currency of Hong Kong. In addition, all references to “Sterling” and “£” refer to pounds sterling,
references to “Singapore dollars” and “S$” refer to Singapore dollars and references to “euro”, “EUR”
and “ = ” refer to the currency introduced at the start of the third stage of European economic and
      C
monetary union pursuant to the Treaty establishing the European Community, as amended.

For convenience, unless otherwise specified, certain RMB amounts have been translated into US
Dollars and Hong Kong Dollars based on the prevailing exchange rate of RMB6.5718 = US$1.00 and
HKD7.7986 = US$1.00 respectively, being the middle market spot rate of exchange for RMB against
the US Dollar and RMB against the Hong Kong Dollars quoted by the People’s Bank of China (the
PBOC) on 16 March 2011. Certain figures and percentages included in this Offering Circular have
been subject to rounding adjustments; accordingly figures shown in the same category presented in
different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic
aggregation of the figures which precede them.

Unless otherwise indicated, all financial information has been presented in RMB in accordance with
PRC GAAP. No representation is made that the RMB, Hong Kong Dollars or US Dollar amounts
shown herein could have been or could be converted into US Dollars, Hong Kong Dollars or RMB,
as the case may be, at any particular rate or at all. Where information in this Offering Circular has
been presented in thousands or millions of units, amounts may have been rounded up or down.
Accordingly, totals of columns or rows of numbers in tables may not be equal to the apparent total of
the individual items and actual numbers may differ from those contained herein due to rounding.

References in this document to the “Group” shall mean the Bank and its consolidated subsidiaries.


       CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
                         STATEMENTS

The Bank has included statements in this Offering Circular which contain words or phrases such as
will, would, aim, aimed, is likely, are likely, believe, expect, expected to, will continue,
anticipated, estimate, estimating, intend, plan, seeking to, future, objective, should, can, could,
may, and similar expressions or variations of such expressions, that are “forward-looking statements”.
However, these words are not the exclusive means of identifying forward-looking statements. All
statements regarding the expected financial position, business strategy, plans and prospects of the
Bank (including the financial forecasts, profit projections, statements as to the expansion plans of the
Bank, expected growth in the Bank and other related matters), if any, are forward-looking statements
and accordingly, are only predictions. These forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results, performance or achievements
of the Bank to be materially different from any future results, performance or achievements expressed
or implied by such forward-looking statements. These factors are discussed in greater detail under the
section “Investment Considerations — Risks relating to this Offering Circular — Risks relating to
forward-looking statements”.

Given the risks and uncertainties that may cause the actual future results, performance or
achievements of the Bank to be materially different from the results, performance or achievements
expected, expressed or implied by the forward-looking statements in this Offering Circular, undue
reliance must not be placed on such forward-looking statements. None of the Bank, the Arranger or
any of the Dealers or the Agent or the Registrar or the Paying Agent represents or warrants that the
actual future results, performance or achievements of the Bank will be as discussed in those
statements.


                                                   5
Further, the Bank disclaims any responsibility, and undertakes no obligation, to update or revise any
forward-looking statement contained herein to reflect any changes in the expectations with respect
thereto after the date of this Offering Circular or to reflect any changes in events, conditions or
circumstances on which such statements are based.


                     SUPPLEMENTARY OFFERING CIRCULAR

The Bank has given an undertaking to the Dealers that if at any time during the duration of the
Programme there is a significant change to the Bank, to the extent such change has not been disclosed
by way of an announcement on the website of the SGX-ST, affecting any matter contained in this
Offering Circular, the inclusion of which would reasonably be required by investors and their
professional advisers and would reasonably be expected by them to be found in this Offering Circular,
for the purpose of making an informed assessment of the assets and liabilities, financial position,
profits and losses and prospects of the Bank and the rights attaching to the Notes, the Bank shall
prepare an amendment or supplement to this Offering Circular or publish a replacement Offering
Circular for use in connection with any subsequent offering of the Notes and shall supply to each
Dealer, the Agent, the Registrar and the Paying Agent such number of copies of such supplement
hereto as such Dealer, the Agent may reasonably request.




                                                 6
                                                 TABLE OF CONTENTS

                                                                                                                                        Page

Documents Incorporated by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                       9

Overview of the Programme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               10

Form of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       16

Applicable Final Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          20

Terms and Conditions of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 29

Selected Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              59

Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     61

Investment Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           62

Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      87

Capitalisation and Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               88

Description of the Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         89

Funding and Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

Description of the Bank’s Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

The PRC Banking Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

Subscription and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188

General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193




IN CONNECTION WITH THE ISSUE OF ANY TRANCHE OF NOTES, THE DEALER OR
DEALERS (IF ANY) NAMED AS THE STABILISING MANAGER(S) (OR PERSONS ACTING
ON BEHALF OF ANY STABILISING MANAGER(S)) IN THE APPLICABLE FINAL TERMS
MAY OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING
THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT
OTHERWISE PREVAIL. HOWEVER, THERE IS NO ASSURANCE THAT THE STABILISING
MANAGER(S) (OR PERSONS ACTING ON BEHALF OF A STABILISING MANAGER) WILL
UNDERTAKE    STABILISATION   ACTION.   ANY  STABILISATION   ACTION   OR


                                                                      7
OVERALLOTMENT MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE
PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE RELEVANT TRANCHE OF
NOTES IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO
LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF THE RELEVANT
TRANCHE OF NOTES AND 60 DAYS AFTER THE DATE OF THE ALLOTMENT OF THE
RELEVANT TRANCHE OF NOTES. ANY STABILISATION ACTION OR OVER-ALLOTMENT
MUST BE CONDUCTED BY THE RELEVANT STABILISING MANAGER(S) (OR PERSONS
ACTING ON BEHALF OF ANY STABILISING MANAGER(S)) IN ACCORDANCE WITH ALL
APPLICABLE LAWS AND RULES.




                                    8
                  DOCUMENTS INCORPORATED BY REFERENCE

The following documents which have previously been published or issued from time to time after the
date hereof shall be incorporated in, and form part of, this Offering Circular:

(a)   the most recently published audited consolidated and non-consolidated annual financial
      statements and, if published later, the most recently published consolidated interim financial
      statements (if any) of the Bank, in each case together with any audit or review reports prepared
      in connection therewith (where relevant); and

(b)   all supplements (other than the Final Terms) or amendments to this Offering Circular circulated
      by the Bank from time to time,


save that any statement contained herein or in a document which is deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for the purpose of this Offering
Circular to the extent that a statement contained in any such subsequent document which is deemed
to be incorporated by reference herein modifies or supersedes such earlier statement (whether
expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Offering Circular.


Any published unaudited interim financial statements of the Bank which are, from time to time,
deemed to be incorporated by reference in this Offering Circular will not have been audited or
subject to review by the auditors of the Bank. Accordingly, there can be no assurance that, had
an audit or review been conducted in respect of such financial statements, the information
presented therein would not have been materially different, and investors should not place undue
reliance upon them (see “Investment Considerations — V. Risks relating to this Offering Circular
— Risks relating to unaudited, unreviewed interim financial statements deemed incorporated by
reference”).

The Bank will provide, without charge, to each person to whom a copy of this Offering Circular has
been delivered, upon the request of such person, a copy of any or all of the documents deemed to be
incorporated herein by reference unless such documents have been modified or superseded as
specified above. Requests for such documents should be directed to the Bank at its registered office
set out at the end of this Offering Circular.

The Bank will, in the event of any significant new factor, material mistake or inaccuracy relating to
information included in this Offering Circular which is capable of affecting the assessment of any
Notes, prepare a supplement to this Offering Circular or publish a new Offering Circular for use in
connection with any subsequent issue of Notes.




                                                  9
                                    OVERVIEW OF THE PROGRAMME

The following overview does not purport to be complete and is taken from, and is qualified in its
entirety by, the remainder of this Offering Circular and, in relation to the terms and conditions of
any particular Tranche of Notes, the applicable Final Terms. The Issuer and any relevant Dealer
may agree that Notes shall be issued in a form other than that contemplated in the Terms and
Conditions, in which event a new Offering Circular or a supplement to the Offering Circular, if
appropriate, will be made available which will describe the effect of the agreement reached in
relation to such Notes.

Words and expressions defined in “Form of the Notes” and “Terms and Conditions of the Notes” shall
have the same meanings in this overview.

Issuer: ........................................   Industrial and Commercial Bank of China Limited, Singapore
                                                   branch

Investment Considerations: .........               There are certain factors that may affect the Issuer’s ability to
                                                   fulfil its obligations under Notes issued under the Programme.
                                                   These are set out under “Investment Considerations”. In
                                                   addition, there are certain factors which are material for the
                                                   purpose of assessing the market risks associated with Notes
                                                   issued under the Programme. These are set out under
                                                   “Investment Considerations — Risks relating to the Notes”
                                                   and include the fact that the Notes may not be a suitable
                                                   investment for all investors, certain risks relating to the
                                                   structure of particular Series of Notes and certain market
                                                   risks.

Description: ................................      Euro Medium Term Note Programme.

Arranger: ....................................     Standard Chartered Bank.

Dealers: ......................................    Standard Chartered Bank and any other Dealers appointed in
                                                   accordance with the Programme Agreement.

                                                   The Issuer may from time to time terminate the appointment
                                                   of any dealer under the Programme or appoint additional
                                                   dealers either in respect of one or more Tranches or in respect
                                                   of the whole Programme. References in this Offering Circular
                                                   to “Dealers” are to Standard Chartered Bank and all persons
                                                   appointed as a dealer in respect of one or more Tranches or
                                                   the whole Programme (in each case, whose appointment has
                                                   not been terminated).

Certain Restrictions: ...................          Each issue of Notes denominated in a currency in respect of
                                                   which particular laws, guidelines, regulations, restrictions or
                                                   reporting requirements apply will only be issued in
                                                   circumstances which comply with such laws, guidelines,
                                                   regulations, restrictions or reporting requirements from time
                                                   to time (see “Subscription and Sale”) including the following
                                                   restrictions applicable at the date of this Offering Circular.




                                                             10
                                                  Notes having a maturity of less than one year

                                                  Notes having a maturity of less than one year will, if the
                                                  proceeds of the issue are accepted in the United Kingdom,
                                                  constitute deposits for the purposes of the prohibition on
                                                  accepting deposits contained in section 19 of the Financial
                                                  Services and Markets Act 2000 unless they are issued to a
                                                  limited class of professional investors and have a
                                                  denomination of at least £100,000 or its equivalent, see
                                                  “Subscription and Sale and Transfer and Selling
                                                  Restrictions”.

Agent: ........................................   The Bank of New York Mellon

Registrar: ....................................   The Bank of New York (Luxembourg) S.A.

Transfer Agent: ...........................       The Bank of New York Mellon

Programme Size: .........................         Up to US$300,000,000 (or its equivalent in other currencies
                                                  calculated as described in the Programme Agreement)
                                                  outstanding at any time. The Issuer may increase the amount
                                                  of the Programme in accordance with the terms of the
                                                  Programme Agreement.

Distribution: ...............................     Notes may be distributed by way of private or public
                                                  placement and in each case on a syndicated or non-syndicated
                                                  basis.

                                                  The Notes will be issued in series (each a Series) having one
                                                  or more issue dates and on terms otherwise identical (or
                                                  identical other than in respect of the first payment of interest),
                                                  the Notes of each Series being intended to be interchangeable
                                                  with all other Notes of the Series. Each Series may be issued
                                                  in tranches (each a Tranche) on the same or different issue
                                                  date. The specific terms of each Tranche (which will be
                                                  completed, where necessary, with the relevant terms and
                                                  conditions and, save in respect of the issue date, issue price,
                                                  first payment of interest and nominal amount of the Tranche,
                                                  will be identical to the terms of other Tranches of the same
                                                  Series) will be completed in the Final Terms.

Currencies: .................................     Notes may be denominated in, subject to any applicable legal
                                                  or regulatory restrictions, any currency agreed between the
                                                  Issuer and the relevant Dealer.

Redenomination: .........................         The applicable Final Terms may provide that certain Notes
                                                  may be redenominated in euro. The relevant provisions
                                                  applicable to any such redenomination are contained in
                                                  Condition 4.




                                                            11
Maturities: ..................................   The Notes will have such maturities as may be agreed
                                                 between the Issuer and the relevant Dealer, subject to such
                                                 minimum or maximum maturities as may be allowed or
                                                 required from time to time by the relevant central bank (or
                                                 equivalent body) or any laws or regulations applicable to the
                                                 Issuer or the relevant Specified Currency (as set out in the
                                                 applicable Final Terms).

Issue Price: .................................   Notes will be issued on a fully-paid basis and at an issue price
                                                 which may be at par or at a discount to, or premium over, par.
                                                 Partly-paid Notes may be issued, the issue price of which will
                                                 be payable in two or more instalments.

Form of Notes: ...........................       The Notes will be issued in bearer or registered form as
                                                 described in “Form of the Notes”. Registered Notes will not
                                                 be exchangeable for Bearer Notes and vice versa.

Clearing Systems: .......................        Clearstream, Luxembourg and Euroclear and, in relation to
                                                 any Tranche of Notes, such other clearing system as may be
                                                 agreed between the Issuer, the relevant Paying Agent and the
                                                 relevant Dealer.

Initial Delivery of Notes: ............          On or before the issue date for each Tranche, the Global Note
                                                 representing Bearer Notes or the Global Certificate
                                                 representing Registered Notes may be deposited with a
                                                 common depositary for Euroclear and Clearstream,
                                                 Luxembourg. Global Notes or Global Certificates may also be
                                                 deposited with any other clearing system or may be delivered
                                                 outside any clearing system provided that the method of such
                                                 delivery has been agreed in advance by the Issuer, the
                                                 relevant Paying Agent and the relevant Dealer. Registered
                                                 Notes that are to be credited to one or more clearing systems
                                                 on issue will be registered in the name of nominees or a
                                                 common nominee for such clearing systems.

Fixed Rate Notes: .......................        Fixed interest will be payable on such date or dates as may be
                                                 agreed between the Issuer and the relevant Dealer.

Floating Rate Notes: ...................         Floating Rate Notes will bear interest at a rate determined:

                                                      on the same basis as the floating rate under a notional
                                                      interest rate swap transaction in the relevant Specified
                                                      Currency governed by an agreement incorporating the
                                                      2006 ISDA Definitions (as published by the
                                                      International Swaps and Derivatives Association, Inc.
                                                      (ISDA), and as amended and updated as at the Issue
                                                      Date of the first Tranche of the Notes of the relevant
                                                      Series); or

                                                      on the basis of a reference rate appearing on the agreed
                                                      screen page of a commercial quotation service; or

                                                      on such other basis as may be agreed between the Issuer
                                                      and the relevant Dealer.


                                                          12
                                              The margin (if any) relating to such floating rate will be
                                              agreed between the Issuer and the relevant Dealer for each
                                              Series of Floating Rate Notes.

Other provisions in relation to               Floating Rate Notes may also have a maximum interest rate,
  Floating Rate Notes: ................       a minimum interest rate or both.

                                              Interest on Floating Rate Notes in respect of each Interest
                                              Period, as agreed prior to issue by the Issuer and the relevant
                                              Dealer, will be payable on such Interest Payment Dates, and
                                              will be calculated on the basis of such Day Count Fraction, as
                                              may be agreed between the Issuer and the relevant Dealer.

Zero Coupon Notes: ....................       Zero Coupon Notes will be offered and sold at a discount to
                                              their nominal amount and will not bear interest.

Dual Currency Notes:...................       Payments (whether in respect of principal or interest and
                                              whether at maturity or otherwise) in respect of Dual Currency
                                              Notes will be made in such currencies, and based on such
                                              rates of exchange as may be specified in the relevant Final
                                              Terms.

Index Linked Notes:.....................      Payments of principal in respect of Index Linked Redemption
                                              Notes or of interest in respect of Index Linked Interest Notes
                                              will be calculated by reference to such index and/or formula
                                              as may be specified in the relevant Final Terms.

Redemption: ...............................   The applicable Final Terms will indicate either that the
                                              relevant Notes cannot be redeemed prior to their stated
                                              maturity (other than in specified instalments, if applicable, or
                                              for taxation reasons or following an Event of Default) or that
                                              such Notes will be redeemable at the option of the Issuer
                                              and/or the Noteholders upon giving notice to the Noteholders
                                              or the Issuer, as the case may be, on a date or dates specified
                                              prior to such stated maturity and at a price or prices and on
                                              such other terms as may be agreed between the Issuer and the
                                              relevant Dealer. The terms of any such redemption, including
                                              notice periods, any relevant conditions to be satisfied and the
                                              relevant redemption dates and prices will be indicated in the
                                              applicable Final Terms.

                                              The applicable Final Terms may provide that Notes may be
                                              redeemable in two or more instalments of such amounts and
                                              on such dates as are indicated in the applicable Final Terms.

                                              Notes having a maturity of less than one year may be subject
                                              to restrictions on their denomination and distribution, see
                                              “Certain Restrictions — Notes having a maturity of less than
                                              one year” above.




                                                       13
Denomination of Notes: ..............             The Notes will be issued in such denominations as may be
                                                  agreed between the Issuer and the relevant Dealer save that
                                                  the minimum denomination of each Note will be such amount
                                                  as may be allowed or required from time to time by the
                                                  relevant central bank (or equivalent body) or any laws or
                                                  regulations applicable to the relevant Specified Currency, see
                                                  “Certain Restrictions — Notes having a maturity of less than
                                                  one year” above, and save that the minimum denomination of
                                                  each Note admitted to trading on a regulated market within
                                                  the European Economic Area or offered to the public in a
                                                  Member State of the European Economic Area in
                                                  circumstances which would have required the publication of a
                                                  prospectus under the Prospectus Directive (as defined below)
                                                  will be = 50,000 or, where the Member State in which the
                                                           C
                                                  offer is being made has implemented the 2010 PD Amending
                                                  Directive, = 100,000 (or, in each case, if the Notes are
                                                              C
                                                  denominated in a currency other than euro, the equivalent
                                                  amount in such currency).

Taxation: ....................................    All payments in respect of the Notes will be made without
                                                  deduction for or on account of withholding taxes imposed by
                                                  any Tax Jurisdiction as provided in Condition 8. In the event
                                                  that any such deduction is made, the Issuer will, save in
                                                  certain limited circumstances provided in Condition 8, be
                                                  required to pay additional amounts to cover the amounts so
                                                  deducted.

Negative Pledge: .........................        No negative pledge.

Cross Default: ............................       The terms of the Notes will contain a cross default provision
                                                  as further described in Condition 10.1(c).

Status of the Notes: ....................         The     Notes    will   constitute   direct,  unconditional,
                                                  unsubordinated and unsecured obligations of the Issuer and
                                                  will rank pari passu among themselves and (save for certain
                                                  obligations required to be preferred by law) equally with all
                                                  other unsecured obligations (other than subordinated
                                                  obligations, if any) of the Issuer, from time to time
                                                  outstanding, as set out in Condition 3.

Rating: .......................................   Notes issued under the Programme may be rated or unrated.
                                                  Where an issue of certain series of Notes is rated, its rating
                                                  will not necessarily be the same as the rating applicable to the
                                                  Programme and (where applicable) such rating will be
                                                  specified in the applicable Final Terms. A rating is not a
                                                  recommendation to buy, sell or hold securities and may be
                                                  subject to suspension, change or withdrawal at any time by
                                                  the assigning rating agency.




                                                           14
Listing and Admission to                        Application will be made to the SGX-ST for permission to
  Trading: ..................................   deal in and quotation of any Notes that may be issued
                                                pursuant to the Programme and which are agreed at or prior to
                                                the time of issue thereof to be so listed on the SGX-ST. The
                                                SGX-ST assumes no responsibility for the correctness of any
                                                of the statements made or opinions expressed or reports
                                                contained herein. The approval-in-principle from, and the
                                                admission of any Notes to the Official List of, the SGX-ST is
                                                not to be taken as an indication of the merits of the Bank, the
                                                Programme or the Notes. Unlisted Notes may be issued under
                                                the Programme. The relevant Final Terms in respect of any
                                                Series will specify whether or not such Notes will be listed
                                                and, if so, on which exchange(s) the Notes are to be listed.
                                                There is no assurance that the application to the Official List
                                                of the SGX-ST for the listing of the Notes of any Series will
                                                be approved. For so long as any Notes are listed on the
                                                SGX-ST and the rules of the SGX-ST so require, such Notes
                                                will be traded on the SGX-ST in a minimum board lot size of
                                                S$200,000 (or its equivalent in other currencies).

                                                Notes may be listed or admitted to trading, as the case may be,
                                                on other or further stock exchanges or markets agreed
                                                between the Issuer and the relevant Dealer in relation to the
                                                Series. Notes which are neither listed nor admitted to trading
                                                on any market may also be issued.

                                                The applicable Final Terms will state whether or not the
                                                relevant Notes are to be listed and/or admitted to trading and,
                                                if so, on which stock exchanges and/or markets.

Governing Law: ..........................       The Notes and any non-contractual obligations arising out of
                                                or in connection with the Notes will be governed by, and
                                                construed in accordance with, English law.

Selling Restrictions: ...................       There are restrictions on the offer, sale and transfer of the
                                                Notes in the United States, the European Economic Area
                                                (including the United Kingdom), Japan, Hong Kong,
                                                Singapore and the PRC and such other restrictions as may be
                                                required in connection with the offering and sale of a
                                                particular Tranche of Notes, see “Subscription and Sale”.




                                                         15
                                   FORM OF THE NOTES

The Notes of each Series will be in either bearer form, with or without interest coupons (and talons
for further coupons if appropriate) attached, or registered form, without interest coupons or talons
attached, in each case as specified in the applicable Final Terms.


Bearer Notes

The following applies to Notes specified in the applicable Final Terms to be in bearer form.

Each Tranche of Bearer Notes will be initially issued in the form of a temporary global note (a
Temporary Bearer Global Note) or, if so specified in the applicable Final Terms, a permanent global
note (a Permanent Bearer Global Note and, together with a Temporary Bearer Global Note, each a
Bearer Global Note) which, in either case, will be delivered on or prior to the original issue date of
the Tranche to a common depositary (the Common Depositary) for Euroclear Bank S.A./N.V.
(Euroclear) and Clearstream Banking, société anonyme (Clearstream, Luxembourg). Notes in bearer
form will be delivered and deliverable only outside the United States (including the States and the
District of Columbia, its territories, its possessions and other areas subject to its jurisdiction).

Whilst any Bearer Note is represented by a Temporary Bearer Global Note, payments of principal,
interest (if any) and any other amount payable in respect of the Notes due prior to the Exchange Date
(as defined below) will be made against presentation of the Temporary Bearer Global Note only
outside the United States (including the States and the District of Columbia, its territories, its
possessions and other areas subject to its jurisdiction) and only to the extent that certification (in a
form to be provided) to the effect that the beneficial owners of interests in the Temporary Bearer
Global Note are not U.S. persons or persons who have purchased for resale to any U.S. person or any
person within the United States (including the States and the District of Columbia, its territories, its
possessions and other areas subject to its jurisdiction), as required by U.S. Treasury regulations, has
been received by Euroclear and/or Clearstream, Luxembourg and Euroclear and/or Clearstream,
Luxembourg, as applicable, has given a like certification (based on the certifications it has received)
to the Agent.


On and after the date (the Exchange Date) which is 40 days after a Temporary Bearer Global Note
is issued, interests in such Temporary Bearer Global Note will be exchangeable (free of charge) upon
a request as described therein either for (i) interests in a Permanent Bearer Global Note of the same
Series or (ii) for definitive Bearer Notes of the same Series with, where applicable, receipts, interest
coupons and talons attached (as indicated in the applicable Final Terms and subject, in the case of
definitive Bearer Notes, to such notice period as is specified in the applicable Final Terms), in each
case against certification of beneficial ownership as described above unless such certification has
already been given in connection with a payment of principal, interest or any other amount payable
in respect of the Bearer Notes. The holder of a Temporary Bearer Global Note will not be entitled to
collect any payment of interest, principal or other amount due on or after the Exchange Date unless,
upon due certification, exchange of the Temporary Bearer Global Note for an interest in a Permanent
Bearer Global Note or for definitive Bearer Notes is improperly withheld or refused.


Payments of principal, interest (if any) or any other amounts on a Permanent Bearer Global Note will
be made through Euroclear and/or Clearstream, Luxembourg against presentation or surrender (as the
case may be) of the Permanent Bearer Global Note without any requirement for certification.



                                                  16
The applicable Final Terms will specify that a Permanent Bearer Global Note will be exchangeable
(free of charge), in whole but not in part, for definitive Bearer Notes with, where applicable, receipts,
interest coupons and talons attached upon either (a) not less than 60 days’ written notice given at any
time from Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an
interest in such Permanent Bearer Global Note) to the Agent as described therein or (b) only upon the
occurrence of an Exchange Event. For these purposes, Exchange Event means that (i) an Event of
Default (as defined in Condition 10) has occurred and is continuing, (ii) the Issuer has been notified
that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous
period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an
intention permanently to cease business or have in fact done so and no successor clearing system is
available or (iii) the Issuer has or will become subject to adverse tax consequences which would not
be suffered were the Notes represented by the Permanent Bearer Global Note in definitive form. The
Issuer will promptly give notice to Noteholders in accordance with Condition 14 if an Exchange Event
occurs. In the event of the occurrence of an Exchange Event, Euroclear and/or Clearstream,
Luxembourg or the common depositary on their behalf (acting on the instructions of any holder of an
interest in such Permanent Bearer Global Note) may give notice to the Agent requesting exchange and,
in the event of the occurrence of an Exchange Event as described in above, the Issuer may also give
notice to the Agent requesting exchange. Any such exchange shall occur not later than 45 days after
the date of receipt of the first relevant notice by the Agent. No definitive Bearer Note delivered in
exchange for a Permanent Bearer Global Note will be mailed or otherwise delivered to any location
in the United States (including the States and the District of Columbia, its territories, its possessions
and other areas subject to its jurisdiction) in connection with such exchange.

The following legend will appear on all Bearer Notes which have an original maturity of more than
365 days and on all receipts and interest coupons relating to such Notes:

“ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE
LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE
CODE.”

The sections referred to provide that United States holders, with certain exceptions, will not be
entitled to deduct any loss on Bearer Notes, receipts or interest coupons and will not be entitled to
capital gains treatment of any gain on any sale, disposition, redemption or payment of principal in
respect of such Notes, receipts or interest coupons or talons.

Notes which are represented by a Bearer Global Note will only be transferable in accordance with the
rules and procedures for the time being of Euroclear or Clearstream, Luxembourg, as the case may be.

Registered Notes

The following applies to Notes specified in the applicable Final Terms to be in registered form.

The Registered Notes of each Tranche offered and sold in reliance on Regulation S, which will be sold
to non-U.S. persons outside the United States, will initially be represented by a global note in
registered form (a Registered Global Note and, together with any Bearer Global Note, each, a Global
Note). Prior to expiry of the distribution compliance period (as defined in Regulation S) applicable
to each Tranche of Notes, beneficial interests in a Registered Global Note may not be offered or sold
to, or for the account or benefit of, a U.S. person save as otherwise provided in Condition 2(a) and
may not be held otherwise than through Euroclear or Clearstream, Luxembourg and such Registered
Global Note will bear a legend regarding such restrictions on transfer.


                                                   17
Registered Global Notes will be deposited with a common depositary for, and registered in the name
of a common nominee of, Euroclear and Clearstream, Luxembourg, as specified in the applicable Final
Terms. Persons holding beneficial interests in Registered Global Notes will be entitled or required, as
the case may be, under the circumstances described below, to receive physical delivery of definitive
Notes in fully registered form.


Payments of principal, interest and any other amount in respect of the Registered Global Notes will,
in the absence of provision to the contrary, be made to the person shown on the Register (as defined
in Condition 6.4) as the registered holder of the Registered Global Notes. None of the Issuer, the
Agent, any Paying Agent or the Registrar will have any responsibility or liability for any aspect of the
records relating to or payments or deliveries made on account of beneficial ownership interests in the
Registered Global Notes or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.

Payments of principal, interest or any other amount in respect of the Registered Notes in definitive
form will, in the absence of provision to the contrary, be made to the persons shown on the Register
on the relevant Record Date (as defined in Condition 6.4) immediately preceding the due date for
payment in the manner provided in that Condition.

Interests in a Registered Global Note will be exchangeable (free of charge), in whole but not in part,
for definitive Registered Notes without receipts, interest coupons or talons attached only upon the
occurrence of an Exchange Event. For these purposes, Exchange Event means that (i) an Event of
Default has occurred and is continuing, (ii) if the Registered Global Note is registered in the name of
a nominee for a common depositary for Euroclear and Clearstream, Luxembourg and the Issuer has
been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a
continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have
announced an intention permanently to cease business or have in fact done so and, in any such case,
no successor clearing system is available or (iii) the Issuer has or will become subject to adverse tax
consequences which would not be suffered were the Notes represented by the Registered Global Note
in definitive form. The Issuer will promptly give notice to Noteholders in accordance with Condition
14 if an Exchange Event occurs. In the event of the occurrence of an Exchange Event, Euroclear and/or
Clearstream, Luxembourg or any person acting on their behalf (acting on the instructions of any holder
of an interest in such Registered Global Note) may give notice to the Registrar requesting exchange
and, in the event of the occurrence of an Exchange Event as described above, the Issuer may also give
notice to the Registrar requesting exchange. Any such exchange shall occur not later than 10 days after
the date of receipt of the first relevant notice by the Registrar.

Transfer of Interests

Interests in a Registered Global Note may, subject to compliance with all applicable restrictions, be
transferred to a person who wishes to hold such interest in another Registered Global Note. No
beneficial owner of an interest in a Registered Global Note will be able to transfer such interest,
except in accordance with the applicable procedures of Euroclear and Clearstream, Luxembourg, in
each case to the extent applicable.

General

Pursuant to the Agency Agreement (as defined under “Terms and Conditions of the Notes”), the Agent
shall arrange that, where a further Tranche of Notes is issued which is intended to form a single Series


                                                  18
with an existing Tranche of Notes, the Notes of such further Tranche shall be assigned a common code
and ISIN which are different from the common code and ISIN to Notes of any other Tranche of the
same Series until at least the expiry of the distribution compliance period (as defined in Regulation
S) applicable to the Notes of such Tranche.


Any reference herein to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so
permits, be deemed to include a reference to any additional or alternative clearing system specified
in the applicable Final Terms or as may otherwise be approved by the Issuer and the Agent.

A Note may be accelerated by the holder thereof in certain circumstances described in Condition 10.
In such circumstances, where any Note is still represented by a Global Note and the Global Note (or
any part thereof) has become due and repayable in accordance with the Conditions of such Notes and
payment in full of the amount due has not been made in accordance with the provisions of the Global
Note then the Global Note will become void at 8.00 p.m. (London time) on the day immediately
following such day. At the same time holders of interests in such Global Note credited to their
accounts with Euroclear and/or Clearstream, Luxembourg, as the case may be, will become entitled
to proceed directly against the Issuer on the basis of statements of account provided by Euroclear and
Clearstream, Luxembourg on and subject to the terms of a deed of covenant (the Deed of Covenant)
dated 25 March 2011 and executed by the Issuer.


The Issuer may agree with any Dealer that Notes may be issued in a form not contemplated by the
Terms and Conditions of the Notes herein, in which event a new Offering Circular or a supplement
to the Offering Circular, if appropriate, will be made available which will describe the effect of the
agreement reached in relation to such Notes.




                                                 19
                               APPLICABLE FINAL TERMS

Set out below is the form of Final Terms which will be completed for each Tranche of Notes issued
under the Programme.

[Date]

 INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED, SINGAPORE BRANCH

               Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes]
                                   under the US$300,000,000
                             Euro Medium Term Note Programme

This document constitutes the Final Terms relating to the issue of Notes described herein.

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the
Conditions) set forth in the Offering Circular dated 25 March 2011 [and the supplemental Offering
Circular dated [date]] (together, the Offering Circular). This document constitutes the Final Terms
of the Notes described herein and must be read in conjunction with the Offering Circular. Full
information on the Issuer and the offer of the Notes is only available on the basis of the combination
of these Final Terms and the Offering Circular.

[The following alternative language applies if the first tranche of an issue which is being increased
was issued under an Offering Circular with an earlier date:

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the
Conditions) set forth in the Offering Circular dated 25 March 2011 [and the supplemental Offering
Circular dated [date]] (together, the Offering Circular). This document constitutes the Final Terms
of the Notes described herein and must be read in conjunction with the Offering Circular, save in
respect of the Conditions which are extracted from the Offering Circular dated 25 March 2011 and are
attached hereto.]

[Include whichever of the following apply or specify as “Not Applicable” (N/A). Note that the
numbering should remain as set out below, even if “Not Applicable” is indicated for individual
paragraphs or subparagraphs. Italics denote directions for completing the Final Terms.]

[If the Notes have a maturity of less than one year from the date of their issue, the minimum
denomination [must/may need to] be £100,000 or its equivalent in any other currency.]

[In the case of any Notes which are to be offered to the public in a Member State of the European
Economic Area in circumstances which would have required the publication of a prospectus under the
Prospectus Directive (2003/71/EC) and the Member State in which the offer is being made has
implemented Directive 2010/73/EU (the 2010 PD Amending Directive), the minimum specified
denomination will be = 100,000 (or, in each case, its equivalent in any other currency as at the date
                       C
of Issue of the Notes) and the provisions regarding denomination below should be read accordingly.]

[In the case of Notes which are qualifying debt securities (QDS) for Singapore income tax purposes,
it should be noted that the tax exemptions granted pursuant to the QDS tax incentive scheme in
Singapore for any interest, discount, redemption premium, prepayment fees or break costs from QDS
will not apply to a person deriving such income who is not tax resident in Singapore and who carries
on any operation in Singapore through a permanent establishment in Singapore, where such person
acquires the QDS using funds from Singapore operations. Any person whose income derived from any
Notes which are QDS issued is not exempt from Singapore tax is required under the Singapore Income
Tax Act (ITA) to include such income in a return of income made under the ITA.]


                                                 20
Issuer:                             Industrial and Commercial Bank of China Limited, Singapore
                                    branch

  Branch:                           [●] [if applicable]

  Series Number:                    [●]

  Tranche Number:                   [●]
                                    (If fungible with an existing Series, details of that Series,
                                    including the date on which the Notes become fungible)

Specified Currency or Currencies:   [●]

Aggregate Nominal Amount:

  Series:                           [●]

  Tranche:                          [●]

  Issue Price:                      [●] per cent, of the Aggregate Nominal Amount [plus accrued
                                    interest from [insert date] (if applicable)]

  [(a)] Net Proceeds                [●] (include for listed issues if required by the stock exchange
                                    on which the Notes are listed.)]

  Specified Denominations:          [[●] (Note: where multiple denominations above = 50,000 or
                                                                                   C
                                    equivalent are being used the following sample wording
                                    should be followed:

                                    “ = 50,000 and integral multiples of = 1,000 in excess thereof
                                      C                                  C
                                    up to and including = 99,000. No Notes in definitive form will
                                                        C
                                    be issued with a denomination above = 99,000.”)
                                                                           C

                                    (N.B. If an issue of Notes is (i) NOT admitted to trading on a
                                    European Economic Area exchange; and (ii) only offered in
                                    the European Economic Area in circumstances where a
                                    prospectus is not required to be published under the
                                    Prospectus Directive the = 50,000 or equivalent minimum
                                                                C
                                    denomination is not required.)]

                                    (In the case of Registered Notes, this means the minimum
                                    integral amount in which transfers can be made.)

  Calculation Amount:               [●] (If only one Specified Denomination, insert the Specified
                                    Denomination.

                                    If more than one Specified Denomination, insert the highest
                                    common factor. Note: There must be a common factor in the
                                    case of two or more Specified Denominations.)

  Issue Date:                       [●]

  Interest Commencement Date:       [specify/Issue Date/Not Applicable]

                                    (N.B. An Interest Commencement Date will not be relevant for
                                    certain Notes, for example Zero Coupon Notes.)



                                             21
Maturity Date:                   [Fixed rate — specify date/Floating rate — Interest Payment
                                 Date falling in or nearest to [specify month and year]]

Interest Basis:                  [[●] per cent. Fixed Rate]
                                 [[LIBOR/EURIBOR] +/- [●] per cent.
                                 Floating Rate]
                                 [Zero Coupon]

                                 [specify other]
                                 (further particulars specified below)

Redemption/Payment Basis:        [Redemption at par]

                                 [Instalment]
                                 [specify other]

Change of Interest Basis or      [Specify details of any provision for change of Notes into
  Redemption/Payment Basis:      another Interest Basis or Redemption/ Payment Basis]

Put/Call Options:                [Investor Put]
                                 [Issuer Call]
                                 [(further particulars specified below)]

  Status of the Notes:           [Senior]

  Date Board approval for        [●]
   issuance of Notes obtained:   (N.B. Only relevant where Board (or similar) authorisation is
                                 required for the particular Tranche of Notes)

Method of distribution:          [Syndicated/Non-syndicated]

Listing                          [[●] (specify)/None]

Additional Tax considerations    [[●] (specify)/None]

PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE

Fixed Rate Note Provisions       [Applicable/Not Applicable]

                                 (If not applicable, delete the remaining subparagraphs of this
                                 paragraph)

  Rate(s) of Interest:           [●]    per   cent.    per   annum      [payable      [annually/
                                 semi-annually/quarterly/other (specify)] in arrear] (If payable
                                 other than annually, consider amending Condition [●])

  Interest Payment Date(s):      [[●] in each year up to and including the Maturity
                                 Date]/[specify other]

                                 (N.B. This will need to be amended in the case of long or short
                                 coupons)

  Fixed Coupon Amount(s):        [●] per Calculation Amount
    (Applicable to Notes in
    definitive form.)




                                            22
  Broken Amount(s):                [●] per Calculation Amount, payable on the Interest Payment
    (Applicable to Notes in        Date falling [in/on] [●]
    definitive form.)

  Day Count Fraction:              [30/360 or Actual/Actual (ICMA) or [specify other]]

  Determination Date(s):           [[●] in each year] [Not Applicable]
                                   (Insert regular interest payment dates, ignoring issue date or
                                   maturity date in the case of a long or short first or last
                                   coupon

                                   N.B. This will need to be amended in the case of regular
                                   interest payment dates which are not of equal duration

                                   N.B. Only relevant where         Day    Count    Fraction   is
                                   Actual/Actual (ICMA))

  Other terms relating to the      [None/Give details]
    method of calculating
    interest for Fixed Rate
    Notes:

Floating Rate Note Provisions      [Applicable/Not Applicable]
                                   (If not applicable, delete the remaining subparagraphs of this
                                   paragraph)

  Specified Period(s)/Specified    [●]
    Interest Payment Dates:

  Business Day Convention:         [Floating Rate Convention/Following Business Day
                                   Convention/Modified Following Business Day Convention/
                                   Preceding Business Day Convention/[specify other]]

  Additional Business Centre(s):   [●]

  Manner in which the Rate of      [Screen   Rate   Determination/ISDA    Determination/specify
   Interest and Interest Amount    other]
   is to be determined:

  Party responsible for            [●]
    calculating the Rate of
    Interest and Interest Amount
    (if not the Agent):

  Screen Rate Determination:

  • Reference Rate:                [●]
                                   (Either LIBOR, EURIBOR or other, although additional
                                   information is required if other — including fallback
                                   provisions in the Agency Agreement)




                                             23
 • Interest Determination         [●]
   Date(s):                       (Second London business day prior to the start of each
                                  Interest Period if LIBOR (other than Sterling or euro LIBOR),
                                  first day of each Interest Period if Sterling LIBOR and the
                                  second day on which the TARGET2 System is open prior to the
                                  start of each Interest Period if EURIBOR or euro LIBOR)

 • Relevant Screen Page:          [●]
                                  (In the case of EURIBOR, if not Reuters EURIBOR01 ensure
                                  it is a page which shows a composite rate or amend the
                                  fallback provisions appropriately)

 ISDA Determination:

 • Floating Rate Option:          [●]

 • Designated Maturity:           [●]

 • Reset Date:                    [●]

 Margin(s):                       [+/-] [●] per cent. per annum

 Minimum Rate of Interest:        [●] per cent. per annum

 Maximum Rate of Interest:        [●] per cent. per annum

 Day Count Fraction:              [Actual/Actual (ISDA)
                                  Actual/365 (Fixed)
                                  Actual/365 (Sterling)
                                  Actual/360
                                  30/360
                                  30E/360
                                  30E/360 (ISDA)
                                  Other]
                                  (See Condition [●] for alternatives)

 Fallback provisions, rounding    [●]
   provisions and any other
   terms relating to the method
   of calculating interest on
   Floating Rate Notes, if
   different from those set out
   in the Conditions:

Zero Coupon Note Provisions       [Applicable/Not Applicable]
                                  (If not applicable, delete the remaining subparagraphs of this
                                  paragraph)

 Accrual Yield:                   [●] per cent. per annum

 Reference Price:                 [●]

 Any other formula/basis of       [●]
  determining amount payable:




                                           24
  Day Count Fraction in relation    [Condition [●] apply/specify other]
   to Early Redemption              (Consider applicable day count fraction if not U.S. dollar
   Amounts and late payment:        denominated)

PROVISIONS RELATING TO REDEMPTION

Issuer Call:                        [Applicable/Not Applicable]
                                    (If not applicable, delete the remaining subparagraphs of this
                                    paragraph)

  Optional Redemption Date(s):      [●]

  Optional Redemption Amount        [[●] per Calculation Amount/specify other/see Appendix]
   and method, if any, of
   calculation of such
   amount(s):

  If redeemable in part:

    Minimum Redemption              [●]
     Amount:

    Maximum Redemption              [●]
     Amount:

  Notice period (if other than as   [●]
   set out in the Conditions):      (N.B. If setting notice periods which are different to those
                                    provided in the Conditions, the Issuer is advised to consider
                                    the practicalities of distribution of information through
                                    intermediaries, for example, clearing systems and custodians,
                                    as well as any other notice requirements which may apply, for
                                    example, as between the Issuer and the Agent)

Investor Put:                       [Applicable/Not Applicable]
                                    (If not applicable, delete the remaining subparagraphs of this
                                    paragraph)

  Optional Redemption Date(s):      [●]

  Optional Redemption Amount        [[●] per Calculation Amount/specify other/ see Appendix]
   and method, if any, of
   calculation of such
   amount(s):

  Notice period (if other than as   [●]
   set out in the Conditions):      (N.B. If setting notice periods which are different to those
                                    provided in the Conditions, the Issuer is advised to consider
                                    the practicalities of distribution of information through
                                    intermediaries, for example, clearing systems and custodians,
                                    as well as any other notice requirements which may apply, for
                                    example, as between the Issuer and the Agent)

Final Redemption Amount:            [[●] per Calculation Amount/specify other/ see Appendix]




                                             25
Early Redemption Amount             [[●] per Calculation Amount/specify other/ see Appendix]
  payable on redemption for
  taxation reasons or on event of
  default and/or the method of
  calculating the same (if
  required or if different from
  that set out in Condition
  [Redemption and Purchase —
  Early Redemption Amounts]):

GENERAL PROVISIONS APPLICABLE TO THE NOTES

Form of Notes:                      [Bearer Notes

                                    [Temporary Global Note exchangeable for a Permanent
                                    Global Note which is exchangeable for Definitive Notes [on
                                    60 days’ notice given at any time/only upon an Exchange
                                    Event]]

                                    [Temporary Global Note exchangeable for Definitive Notes
                                    on and after the Exchange Date]

                                    [Permanent Global Note exchangeable for Definitive Notes
                                    [on 60 days’ notice given at any time/only upon an Exchange
                                    Event/at any time at the request of the Issuer]]]

                                    [Registered Notes:

                                    [Registered Global Note (US$[●] nominal amount) registered
                                    in the name of a common depositary for Euroclear and
                                    Clearstream, Luxembourg]

                                    [(Ensure that this is consistent with the wording in the “Form
                                    of the Notes” section in the Offering Circular and the Notes
                                    themselves. N.B. The exchange upon notice/at any time at the
                                    request of the Issuer options should not be expressed to be
                                    applicable if the Specified Denomination of the Notes in
                                    paragraph 0 includes language substantially to the following
                                    effect: “ = 50,000 and integral multiples of = 1,000 in excess
                                              C                                  C
                                    thereof up to and including = 99,000).” Furthermore, such
                                                                   C
                                    Specified Denomination construction is not permitted in
                                    relation to any issue of Notes which is to be represented on
                                    issue by a Temporary Global Note exchangeable for
                                    Definitive Notes.) ]]

Additional Financial Centre(s) or   [Not Applicable/give details]
 other special provisions           (Note that this paragraph relates to the place of payment and
 relating to Payment Days:          not Interest Period end dates to which subparagraph 0
                                    relates)




                                             26
Talons for future Coupons or        [Yes/No. If yes, give details]
  Receipts to be attached to
  Definitive Notes in bearer form
  (and dates on which such
  Talons mature):

Details relating to Instalment
 Notes:

    Instalment Amount(s):           [Not Applicable/give details]

    Instalment Date(s):             [Not Applicable/give details]

Redenomination applicable:          Redenomination [not] applicable
                                    [(If Redenomination is applicable, specify the applicable Day
                                    Count Fraction and any provisions necessary to deal with
                                    floating rate interest calculation (including alternative
                                    reference rates))]

Other final terms:                  [Not Applicable/give details]

Ratings:                            [Not Applicable/give details]

Governing law:                      [English]

DISTRIBUTION

•      If syndicated, names of      [Not Applicable/give names]
       Managers:

       Stabilising Manager(s) (if   [Not Applicable/give name]
         any):

If non-syndicated, name of          [Not Applicable/give name]
   relevant Dealer:

U.S. Selling Restrictions:          [Reg. S Category;       TEFRA     D/TEFRA      C/TEFRA     not
                                    applicable]

Additional selling restrictions:    [Not Applicable/give details]

For Bearer Notes only: the date     [Insert date]
  falling immediately after the
  end of the Distribution           [In the case of a Tranche in respect of which there is only one
  Compliance Period (as such        Dealer, the end of the Distribution Compliance Period in
  term is defined in Regulation S   respect of the Tranche will be the fortieth day following the
  of the Securities Act):           date determined as being the date on which distribution of the
                                    Notes of that Tranche was completed]




                                                27
                                       [In the case of a Tranche in respect of which there is more
                                       than one Dealer but which is not issued on a syndicated basis,
                                       the end of the Distribution Compliance Period in respect of
                                       the Tranche will be the fortieth day following the last of the
                                       dates determined by all the relevant Dealers as being the
                                       respective dates on which distribution of the Notes of that
                                       Tranche purchased by each Dealer was completed.]

                                       [In the case of a Tranche issued on a syndicated basis, the end
                                       of the Distribution Compliance Period in respect of the
                                       Tranche will be the fortieth day following the date determined
                                       by the Lead Manager as being the date on which distribution
                                       of the Notes of that Tranche was completed.]


PURPOSE OF FINAL TERMS

These Final Terms comprise the final terms required for issue and admission to trading on [specify
relevant regulated market] of the Notes described herein pursuant to the US$300,000,000 Euro
Medium Term Note Programme of Industrial and Commercial Bank of China Limited.


OPERATIONAL INFORMATION

ISIN Code:                             [●]

Common Code:                           [●]

Any clearing system(s) other than      [Not Applicable/give name(s) and number(s)]
 Euroclear Bank S.A./N.V. and
 Clearstream Banking, société
 anonyme and the relevant
 identification number(s):

Delivery:                              Delivery [against/free of] payment

Names and addresses of                 [●]
 additional Paying Agent(s) (if
 any):

RESPONSIBILITY


The Issuer accepts responsibility for the information contained in these Final Terms.

Signed on behalf of Industrial and Commercial Bank of China Limited, Singapore Branch

By:
      Duly authorised




                                                28
                     TERMS AND CONDITIONS OF THE NOTES

The following are the Terms and Conditions of the Notes which will be incorporated by reference into
each Global Note (as defined below), each definitive Bearer Note and each definitive Registered Note,
but, in the case of definitive Bearer Notes and definitive Registered Notes, only if permitted by the
relevant stock exchange or other relevant authority (if any) and agreed by the Issuer and the relevant
Dealer at the time of issue but, if not so permitted and agreed, such definitive Note or definitive
Registered Note will have endorsed thereon or attached thereto such Terms and Conditions. The
applicable Final Terms in relation to any Tranche of Notes may specify other terms and conditions
which shall, to the extent so specified or to the extent inconsistent with the following Terms and
Conditions, replace or modify the following Terms and Conditions for the purpose of such Notes. The
applicable Final Terms (or the relevant provisions thereof) will be endorsed upon, or attached to, each
Global Note and definitive Note. Reference should be made to “Form of the Notes” for a description
of the content of Final Terms which will specify which of such terms are to apply in relation to the
relevant Notes.

This Note is one of a Series (as defined below) of Notes issued by Industrial and Commercial Bank
of China Limited, Singapore branch (the Issuer) pursuant to the Agency Agreement (as defined
below).

References herein to the Notes shall be references to the Notes of this Series and shall mean:

in relation to any Notes represented by a global Note (a Global Note), units of the lowest Specified
Denomination in the Specified Currency;

any Global Note in bearer form (each a Bearer Global Note);

any Global Note in registered form (each a Registered Global Note);

any definitive Notes in bearer form (Definitive Bearer Notes and, together with Bearer Global Notes,
the Bearer Notes) issued in exchange for a Global Note in bearer form; and

any definitive Notes in registered form (Definitive Registered Notes and, together with Registered
Global Notes, the Registered Notes) (whether or not issued in exchange for a Global Note in
registered form).

The Notes, the Receipts (as defined below) and the Coupons (as defined below) have the benefit of
an Agency Agreement (such Agency Agreement as amended and/or supplemented and/or restated from
time to time, the Agency Agreement) dated 25 March 2011 and made between the Issuer, The Bank
of New York Mellon as agent bank (the Fiscal Agent, which expression shall include any successor
fiscal agent) and the other paying agents named therein (together with the Registrar and Agent, acting
in its capacity as paying agent, the Paying Agents, which expression shall include any additional or
successor paying agents), The Bank of New York (Luxembourg) S.A. as registrar (the Registrar,
which expression shall include any successor registrar) and a transfer agent and the other transfer
agents named therein (together with the Registrar, the Transfer Agents, which expression shall
include any additional or successor transfer agents).

Interest-bearing Definitive Bearer Notes have interest coupons (Coupons) and, if indicated in the
applicable Final Terms, talons for further Coupons (Talons) attached on issue. Any reference herein
to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a reference
to Talons or talons. Definitive Bearer Notes repayable in instalments have receipts (Receipts) for the
payment of the instalments of principal (other than the final instalment) attached on issue. Registered
Notes and Global Notes do not have Receipts, Coupons or Talons attached on issue.


                                                  29
The final terms for this Note (or the relevant provisions thereof) are set out in the Final Terms attached
to or endorsed on this Note which supplement these Terms and Conditions (the Conditions) and may
specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent
with the Conditions, replace or modify the Conditions for the purposes of this Note. References to the
applicable Final Terms are to the Final Terms (or the relevant provisions thereof) attached to or
endorsed on this Note.

Any reference to Noteholders or holders in relation to any Notes shall mean, in the case of Bearer
Notes, the holders of the Notes and, in case of Registered Notes, the persons in whose name the Notes
are registered and shall, in relation to any Notes represented by a Global Note, be construed as
provided below. Any reference herein to Receiptholders shall mean the holders of the Receipts and
any reference herein to Couponholders shall mean the holders of the Coupons and shall, unless the
context otherwise requires, include the holders of the Talons.

As used herein, Tranche means Notes which are identical in all respects (including as to listing and
admission to trading) and Series means a Tranche of Notes together with any further Tranche or
Tranches of Notes which are (a) expressed to be consolidated and form a single series and (b) identical
in all respects (including as to listing and admission to trading) except for their respective Issue Dates,
Interest Commencement Dates and/or Issue Prices.

The Noteholders, the Receiptholders and the Couponholders are entitled to the benefit of the Deed of
Covenant (the Deed of Covenant) dated 25 March 2011 and made by the Issuer. The original of the
Deed of Covenant is held by the common depositary for Euroclear (as defined below) and Clearstream,
Luxembourg (each as defined below).

Copies of the Agency Agreement and the Deed of Covenant are available for inspection during normal
business hours at the registered office of each of the Fiscal Agent, the Registrar and the other Paying
Agents. Copies of the applicable Final Terms are available for viewing at the registered office of each
the Issuer, the Fiscal Agent and the Registrar in the case of Registered Notes, and at the registered
office of the other Paying Agents in the case of Bearer Notes, and copies may be obtained from those
offices save that, if this Note is an unlisted Note of any Series, the applicable Final Terms will only
be obtainable by a Noteholder holding one or more Notes and such Noteholder must produce evidence
satisfactory to the Issuer and the relevant Paying Agent as to its holding of such Notes and identity.
The Noteholders, the Receiptholders and the Couponholders are deemed to have notice of, and are
entitled to the benefit of, all the provisions of the Agency Agreement, the Deed of Covenant and the
applicable Final Terms which are applicable to them. The statements in the Conditions include
summaries of, and are subject to, the detailed provisions of the Agency Agreement.

Words and expressions defined in the Agency Agreement or used in the applicable Final Terms shall
have the same meanings where used in the Conditions unless the context otherwise requires or unless
otherwise stated and provided that, in the event of inconsistency between the Agency Agreement and
the applicable Final Terms, the applicable Final Terms will prevail.

1.   FORM, DENOMINATION AND TITLE

The Notes are either in bearer form or in registered form, as specified in the applicable Final Terms
and, in the case of Definitive Bearer Notes, serially numbered, in the Specified Currency and the
Specified Denomination(s). Bearer Notes of one Specified Denomination may not be exchanged for
Bearer Notes of another Specified Denomination and Bearer Notes may not be exchanged for
Registered Notes and vice versa.


                                                    30
This Note may be a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Index Linked
Interest Note, a Dual Currency Interest Note or a combination of any of the foregoing, depending upon
the Interest Basis shown in the applicable Final Terms.

This Note may be an Index Linked Redemption Note, an Instalment Note, a Dual Currency
Redemption Note, a Partly Paid Note or a combination of any of the foregoing, depending upon the
Redemption/Payment Basis shown in the applicable Final Terms.

Definitive Bearer Notes are issued with Coupons attached, unless they are Zero Coupon Notes in
which case references to Coupons and Couponholders in the Conditions are not applicable.

Subject as set out below, title to the Bearer Notes, Receipts and Coupons will pass by delivery, and
title to the Registered Notes will pass upon registration of transfers in accordance with the provisions
of the Agency Agreement. The Issuer and the Paying Agents will (except as otherwise required by law)
deem and treat the bearer of any Bearer Note, Receipt or Coupon and the registered holder of any
Registered Note as the absolute owner thereof (whether or not overdue and notwithstanding any notice
of ownership or writing thereon or notice of any previous loss or theft thereof) for all purposes but,
in the case of any Global Note, without prejudice to the provisions set out in the next succeeding
paragraph.


For so long as any of the Notes is represented by a Global Note held on behalf of Euroclear Bank
S.A./N.V. (Euroclear) and/or Clearstream Banking, société anonyme (Clearstream, Luxembourg),
each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in
the records of Euroclear or Clearstream, Luxembourg as the holder of a particular nominal amount of
such Bearer Notes (in which regard any certificate or other document issued by Euroclear or
Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any
person shall be conclusive and binding for all purposes save in the case of manifest error) shall be
treated by the Issuer and the Paying Agents as the holder of such nominal amount of such Notes for
all purposes other than with respect to the payment of principal or interest on such nominal amount
of such Notes, for which purpose the bearer of the relevant Global Note or the registered holder of
the relevant Registered Global Note shall be treated by the Issuer and any Paying Agent as the holder
of such nominal amount of such Notes in accordance with and subject to the terms of the relevant
Global Note and the expressions Noteholder and holder of Notes and related expressions shall be
construed accordingly.

Notes which are represented by a Global Note will be transferable only in accordance with the rules
and procedures for the time being of Euroclear and Clearstream, Luxembourg, as the case may be.
References to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be
deemed to include a reference to any additional or alternative clearing system specified in the
applicable Final Terms.

For so long as any Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Issuer
shall appoint and maintain a paying agent in Singapore, where such Notes may be presented or
surrendered for payment or redemption, in the event that any of the Global Notes representing such
Notes is exchanged for definitive Notes. In addition, in the event that any of the Global Notes is
exchanged for definitive Notes, an announcement of such exchange will be made by or on behalf of
the Issuer through the SGX-ST and such announcement will include all material information with
respect to the delivery of the definitive Notes, including details of the paying agent in Singapore.



                                                  31
2.     TRANSFERS OF REGISTERED NOTES

(a)    Transfers of interests in Registered Global Notes

Transfers of beneficial interests in Registered Global Notes will be effected by Euroclear or
Clearstream, Luxembourg, as the case may be, and, in turn, by other participants and, if appropriate,
indirect participants in such clearing systems acting on behalf of beneficial transferors and transferees
of such interests. A beneficial interest in a Registered Global Note will, subject to compliance with
all applicable legal and regulatory restrictions, be transferable for Notes in definitive form or for a
beneficial interest in another Registered Global Note only in the authorised denominations set out in
the applicable Final Terms and only in accordance with the rules and operating procedures for the time
being of Euroclear or Clearstream, Luxembourg, as the case may be, and in accordance with the terms
and conditions specified in the Agency Agreement. Transfers of a Registered Global Note registered
in the name of a nominee for Euroclear or Clearstream, Luxembourg shall be limited to transfers of
such Registered Global Note, in whole but not in part, to another nominee of Euroclear or Clearstream,
Luxembourg or to a successor of Euroclear or Clearstream, Luxembourg or such successor’s nominee.

(b)    Transfers of Registered Notes in definitive form

Subject as provided in paragraph (e) below, upon the terms and subject to the conditions set forth in
the Agency Agreement, a Definitive Registered Note may be transferred in whole or in part (in the
authorised denominations set out in the applicable Final Terms). In order to effect any such transfer:

(i)    the holder or holders must:

       (A) surrender the Registered Note for registration of the transfer of the Registered Note (or the
           relevant part of the Registered Note) at the specified office of any Transfer Agent, with the
           form of transfer thereon duly executed by the holder or holders thereof or his or their
           attorney or attorneys duly authorised in writing; and

       (B) complete and deposit such other certifications as may be required by the relevant Transfer
           Agent; and

(ii)   the relevant Transfer Agent must be satisfied with the documents of title and the identity of the
       person making the request.

Any such transfer will be subject to such reasonable regulations as the Issuer and the Registrar may
from time to time prescribe (the initial such regulations being set out in Schedule 8 to the Agency
Agreement). Subject as provided above, the relevant Transfer Agent will, within three business days
(being for this purpose a day on which banks are open for business in the city where the specified
office of the relevant Transfer Agent is located) of the request (or such longer period as may be
required to comply with any applicable fiscal or other laws or regulations), authenticate and deliver,
or procure the authentication and delivery of, at its specified office to the transferee or (at the risk of
the transferee) send by uninsured mail, to such address as the transferee may request, a new Registered
Note in definitive form of a like aggregate nominal amount to the Registered Note (or the relevant part
of the Registered Note) transferred. In the case of the transfer of part only of a Registered Note in
definitive form, a new Registered Note in definitive form in respect of the balance of the Registered
Note not transferred will be so authenticated and delivered or (at the risk of the transferor) sent to the
transferor.


                                                    32
(c)   Registration of transfer upon partial redemption

In the event of a partial redemption of Notes under Condition 7, the Issuer shall not be required to
register the transfer of any Registered Note, or part of a Registered Note, called for partial redemption.

(d)   Costs of registration

Noteholders will not be required to bear the costs and expenses of effecting any registration of transfer
as provided above, except for any costs or expenses of delivery other than by regular uninsured mail
and except that the Issuer may require the payment of a sum sufficient to cover any stamp duty, tax
or other governmental charge that may be imposed in relation to the registration.

(e)   Closed Periods

No Noteholder may require the transfer of a Registered Note to be registered during the period of (i)
15 days ending on (and including) the due date for redemption of, or payment of any Instalment
Amount in respect of, that Note and (ii) seven days ending on (and including) any Record Date.

(f)   Exchanges and transfers of Registered Notes generally

Holders of Definitive Registered Notes may exchange such Notes for interests in a Registered Global
Note of the same type at any time.

3.    STATUS OF THE NOTES

The Notes and any related Receipts and Coupons are direct, unconditional, unsubordinated and
unsecured obligations of the Issuer and rank pari passu among themselves and (save for certain
obligations required to be preferred by law) equally with all other unsecured obligations (other than
subordinated obligations, if any) of the Issuer, from time to time outstanding.

4.    REDENOMINATION

4.1   Redenomination

Where redenomination is specified in the applicable Final Terms as being applicable, the Issuer may,
without the consent of the Noteholders, the Receiptholders and the Couponholders on giving prior
notice to the Agent, Euroclear and Clearstream, Luxembourg and at least 30 days’ prior notice to the
Noteholders in accordance with Condition 14, elect that, with effect from the Redenomination Date
specified in the notice, the Notes shall be redenominated in euro.

The election will have effect as follows:

(a)   the Notes and the Receipts shall be deemed to be redenominated in euro in the denomination of
      euro 0.01 with a nominal amount for each Note and Receipt equal to the nominal amount of that
      Note or Receipt in the Specified Currency, converted into euro at the Established Rate, provided
      that, if the Issuer determines that the then market practice in respect of the redenomination in
      euro of internationally offered securities is different from the provisions specified above, such
      provisions shall be deemed to be amended so as to comply with such market practice and the
      Issuer shall promptly notify the Noteholders, the stock exchange (if any) on which the Notes may
      be listed and the Paying Agents of such deemed amendments;


                                                   33
(b)   save to the extent that an Exchange Notice has been given in accordance with paragraph (d)
      below, the amount of interest due in respect of the Notes will be calculated by reference to the
      aggregate nominal amount of Notes presented (or, as the case may be, in respect of which
      Coupons are presented) for payment by the relevant holder and the amount of such payment shall
      be rounded down to the nearest euro 0.01;

(c)   if definitive Notes are required to be issued after the Redenomination Date, they shall be issued
      at the expense of the Issuer (i) in the case of Relevant Notes, in the denomination of euro 50,000,
      and any remaining amounts less than euro 50,000 shall be redeemed by the Issuer and paid to the
      Noteholders in euro in accordance with Condition 6; and (ii) in the case of Notes which are not
      Relevant Notes, in the denominations of euro 1,000, euro 10,000, euro 100,000 and (but only to
      the extent of any remaining amounts less than euro 1,000) euro 0.01;

(d)   if issued prior to the Redenomination Date, all unmatured Coupons denominated in the Specified
      Currency (whether or not attached to the Notes) will become void with effect from the date on
      which the Issuer gives notice (the Exchange Notice) that replacement euro-denominated Notes,
      Receipts and Coupons are available for exchange (provided that such securities are so available)
      and no payments will be made in respect of them. The payment obligations contained in any
      Notes and Receipts so issued will also become void on that date although those Notes and
      Receipts will continue to constitute valid exchange obligations of the Issuer. New
      euro-denominated Notes, Receipts and Coupons will be issued in exchange for Notes, Receipts
      and Coupons denominated in the Specified Currency in such manner as shall be notified to the
      Noteholders in the Exchange Notice. No Exchange Notice may be given less than 15 days prior
      to any date for payment of principal or interest on the Notes;

(e)   after the Redenomination Date, all payments in respect of the Notes, the Receipts and the
      Coupons, other than payments of interest in respect of periods commencing before the
      Redenomination Date, will be made solely in euro as though references in the Notes to the
      Specified Currency were to euro. Payments will be made in euro by credit or transfer to a euro
      account (or any other account to which euro may be credited or transferred) specified by the
      payee or, at the option of the payee, by a euro cheque;

(f)   if the Notes are Fixed Rate Notes and interest for any period ending on or after the
      Redenomination Date is required to be calculated for a period ending other than on an Interest
      Payment Date, it will be calculated:

      (i)    in the case of the Notes represented by a Global Note, by applying the Rate of Interest to
             the aggregate outstanding nominal amount of the Notes represented by such Global Note;
             and

      (ii)   in the case of definitive Notes, by applying the Rate of Interest to the Calculation Amount;

      and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the
      resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such
      sub-unit being rounded upwards or otherwise in accordance with applicable market convention.
      Where the Specified Denomination of a Fixed Rate Note in definitive form is a multiple of the
      Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall be
      the product of the amount (determined in the manner provided above) for the Calculation Amount
      and the amount by which the Calculation Amount is multiplied to reach the Specified
      Denomination, without any further rounding;

(g)   if the Notes are Floating Rate Notes, the applicable Final Terms will specify any relevant
      changes to the provisions relating to interest; and


                                                    34
(h)   such other changes shall be made to this Condition as the Issuer may decide, after consultation
      with the Agent, and as may be specified in the notice, to conform it to conventions then
      applicable to instruments denominated in euro.

4.2   Definitions

In the Conditions, the following expressions have the following meanings:

Established Rate means the rate for the conversion of the Specified Currency (including compliance
with rules relating to roundings in accordance with applicable European Community regulations) into
euro established by the Council of the European Union pursuant to Article 123 of the Treaty;

euro means the currency introduced at the start of the third stage of European economic and monetary
union pursuant to the Treaty;

Redenomination Date means (in the case of interest bearing Notes) any date for payment of interest
under the Notes or (in the case of Zero Coupon Notes) any date, in each case specified by the Issuer
in the notice given to the Noteholders pursuant to Condition 4.1 above and which falls on or after the
date on which the country of the Specified Currency first participates in the third stage of European
economic and monetary union; and

Relevant Notes means all Notes where the applicable Final Terms provide for a minimum Specified
Denomination in the Specified Currency which is equivalent to at least euro 50,000 and which are
admitted to trading on a regulated market in the European Economic Area; and

Treaty means the Treaty establishing the European Community, as amended.

5.    INTEREST

5.1   Interest on Fixed Rate Notes

Each Fixed Rate Note bears interest on its outstanding nominal amount (or if it is a Partly Paid Note,
the nominal amount paid up) from (and including) the Interest Commencement Date at the rate(s) per
annum equal to the Rate(s) of Interest. Interest will be payable in arrear on the Interest Payment
Date(s) in each year up to (and including) the Maturity Date.

If the Notes are in definitive form, except as provided in the applicable Final Terms, the amount of
interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but
excluding) such date will amount to the Fixed Coupon Amount. Payments of interest on any Interest
Payment Date will, if so specified in the applicable Final Terms, amount to the Broken Amount so
specified.

As used in the Conditions, Fixed Interest Period means the period from (and including) an Interest
Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest
Payment Date.

Except in the case of Notes in definitive form where an applicable Fixed Coupon Amount or Broken
Amount is specified in the applicable Final Terms, interest shall be calculated in respect of any period
by applying the Rate of Interest to:

(a)   in the case of Fixed Rate Notes which are represented by a Global Note, the aggregate
      outstanding nominal amount of the Fixed Rate Notes represented by such Global Note (or, if they
      are Partly Paid Notes, the aggregate amount paid up); or


                                                  35
(b)   in the case of Fixed Rate Notes in definitive form, the Calculation Amount;

and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the
resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit
being rounded upwards or otherwise in accordance with applicable market convention. Where the
Specified Denomination of a Fixed Rate Note in definitive form is a multiple of the Calculation
Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the product of the
amount (determined in the manner provided above) for the Calculation Amount and the amount by
which the Calculation Amount is multiplied to reach the Specified Denomination, without any further
rounding.

Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with
this Condition 5.1:

(a)   if “Actual/Actual (ICMA)” is specified in the applicable Final Terms:

      (i)    in the case of Notes where the number of days in the relevant period from (and including)
             the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to
             (but excluding) the relevant payment date (the Accrual Period) is equal to or shorter than
             the Determination Period during which the Accrual Period ends, the number of days in such
             Accrual Period divided by the product of (I) the number of days in such Determination
             Period and (II) the number of Determination Dates (as specified in the applicable Final
             Terms) that would occur in one calendar year; or

      (ii)   in the case of Notes where the Accrual Period is longer than the Determination Period
             during which the Accrual Period ends, the sum of:

             (A) the number of days in such Accrual Period falling in the Determination Period in
                 which the Accrual Period begins divided by the product of (x) the number of days in
                 such Determination Period and (y) the number of Determination Dates that would
                 occur in one calendar year; and

             (B) the number of days in such Accrual Period falling in the next Determination Period
                 divided by the product of (x) the number of days in such Determination Period and (y)
                 the number of Determination Dates that would occur in one calendar year; and

(b)   if “30/360” is specified in the applicable Final Terms, the number of days in the period from (and
      including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date)
      to (but excluding) the relevant payment date (such number of days being calculated on the basis
      of a year of 360 days with 12 30-day months) divided by 360.

(c)   In the Conditions:

      Determination Period means each period from (and including) a Determination Date to (but
      excluding) the next Determination Date (including, where either the Interest Commencement
      Date or the final Interest Payment Date is not a Determination Date, the period commencing on
      the first Determination Date prior to, and ending on the first Determination Date falling after,
      such date); and

      sub-unit means, with respect to any currency other than euro, the lowest amount of such
      currency that is available as legal tender in the country of such currency and, with respect to
      euro, one cent.


                                                   36
5.2    Interest on Floating Rate Notes and Index Linked Interest Notes

(a)    Interest Payment Dates

Each Floating Rate Note and Index Linked Interest Note bears interest on its outstanding nominal
amount (or if it is a Partly Paid Note, the nominal amount paid up) from (and including) the Interest
Commencement Date and such interest will be payable in arrear on either:

(i)    the Specified Interest Payment Date(s) in each year specified in the applicable Final Terms; or

(ii)   if no Specified Interest Payment Date(s) is/are specified in the applicable Final Terms, each date
       (each such date, together with each Specified Interest Payment Date, an Interest Payment Date)
       which falls the number of months or other period specified as the Specified Period in the
       applicable Final Terms after the preceding Interest Payment Date or, in the case of the first
       Interest Payment Date, after the Interest Commencement Date.

Such interest will be payable in respect of each Interest Period (which expression shall, in the
Conditions, mean the period from (and including) an Interest Payment Date (or the Interest
Commencement Date) to (but excluding) the next (or first) Interest Payment Date).

If a Business Day Convention is specified in the applicable Final Terms and (x) if there is no
numerically corresponding day in the calendar month in which an Interest Payment Date should occur
or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then,
if the Business Day Convention specified is:

(A) in any case where Specified Periods are specified in accordance with Condition 5.2(a)(i) above,
    the Floating Rate Convention, such Interest Payment Date (a) in the case of (x) above, shall be
    the last day that is a Business Day in the relevant month and the provisions of (ii) below shall
    apply mutatis mutandis or (b) in the case of (y) above, shall be postponed to the next day which
    is a Business Day unless it would thereby fall into the next calendar month, in which event (i)
    such Interest Payment Date shall be brought forward to the immediately preceding Business Day
    and (ii) each subsequent Interest Payment Date shall be the last Business Day in the month which
    falls the Specified Period after the preceding applicable Interest Payment Date occurred; or

(B) the Following Business Day Convention, such Interest Payment Date shall be postponed to the
    next day which is a Business Day; or

(C) the Modified Following Business Day Convention, such Interest Payment Date shall be
    postponed to the next day which is a Business Day unless it would thereby fall into the next
    calendar month, in which event such Interest Payment Date shall be brought forward to the
    immediately preceding Business Day; or

(D) the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to
    the immediately preceding Business Day.

In the Conditions, Business Day means a day which is both:

I.     a day on which commercial banks and foreign exchange markets settle payments and are open
       for general business (including dealing in foreign exchange and foreign currency deposits) in
       Singapore, Hong Kong, London and each Additional Business Centre specified in the applicable
       Final Terms; and


                                                    37
(b)    either (i) in relation to any sum payable in a Specified Currency other than euro, a day on which
       commercial banks and foreign exchange markets settle payments and are open for general
       business (including dealing in foreign exchange and foreign currency deposits) in the principal
       financial centre of the country of the relevant Specified Currency (if other than Singapore, Hong
       Kong, London and any Additional Business Centre) or (ii) in relation to any sum payable in euro,
       a day on which the Trans-European Automated Real-time Gross Settlement Express Transfer
       (TARGET2) System (the TARGET2 System) is open.

(b)    Rate of Interest

The Rate of Interest payable from time to time in respect of Floating Rate Notes and Index Linked
Interest Notes will be determined in the manner specified in the applicable Final Terms.

(i)    ISDA Determination for Floating Rate Notes

Where ISDA Determination is specified in the applicable Final Terms as the manner in which the Rate
of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant ISDA
Rate plus or minus (as indicated in the applicable Final Terms) the Margin (if any). For the purposes
of this subparagraph (i), ISDA Rate for an Interest Period means a rate equal to the Floating Rate that
would be determined by the Fiscal Agent under an interest rate swap transaction if the Fiscal Agent
were acting as Calculation Agent for that swap transaction under the terms of an agreement
incorporating the 2006 ISDA Definitions, as published by the International Swaps and Derivatives
Association, Inc. (ISDA) and as amended and updated as at the Issue Date of the first Tranche of the
Notes (the ISDA Definitions) and under which:

(A) the Floating Rate Option is as specified in the applicable Final Terms;

(B) the Designated Maturity is a period specified in the applicable Final Terms; and

(C) the relevant Reset Date is either (a) if the applicable Floating Rate Option is based on the London
    interbank offered rate (LIBOR) or on the Euro-zone interbank offered rate (EURIBOR), the first
    day of that Interest Period or (b) in any other case, as specified in the applicable Final Terms.

For the purposes of this subparagraph (i), Floating Rate, Calculation Agent, Floating Rate Option,
Designated Maturity and Reset Date have the meanings given to those terms in the ISDA Definitions.

Unless otherwise stated in the applicable Final Terms, the Minimum Rate of Interest shall be deemed
to be zero.

(ii)   Screen Rate Determination for Floating Rate Notes

Where Screen Rate Determination is specified in the applicable Final Terms as the manner in which
the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as
provided below, be either:

(A) the offered quotation; or

(B) the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being
    rounded upwards) of the offered quotations,

(expressed as a percentage rate per annum) for the Reference Rate which appears or appear, as the case
may be, on the Relevant Screen Page as at 11.00 a.m. (London time, in the case of LIBOR, or Brussels
time, in the case of EURIBOR) on the Interest Determination Date in question plus or minus (as


                                                   38
indicated in the applicable Final Terms) the Margin (if any), all as determined by the Fiscal Agent.
If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or,
if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if
there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the
Fiscal Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such
offered quotations.

The Agency Agreement contains provisions for determining the Rate of Interest in the event that the
Relevant Screen Page is not available or if, in the case of 6.2(b)(ii)(A) above, no such offered
quotation appears or, in the case of 6.2(b)(ii)(B) above, fewer than three such offered quotations
appear, in each case as at the time specified in the preceding paragraph.

If the Reference Rate from time to time in respect of Floating Rate Notes is specified in the applicable
Final Terms as being other than LIBOR or EURIBOR, the Rate of Interest in respect of such Notes
will be determined as provided in the applicable Final Terms.

(c)    Minimum Rate of Interest and/or Maximum Rate of Interest

If the applicable Final Terms specifies a Minimum Rate of Interest for any Interest Period, then, in
the event that the Rate of Interest in respect of such Interest Period determined in accordance with the
provisions of paragraph (b) above is less than such Minimum Rate of Interest, the Rate of Interest for
such Interest Period shall be such Minimum Rate of Interest.

If the applicable Final Terms specifies a Maximum Rate of Interest for any Interest Period, then, in
the event that the Rate of Interest in respect of such Interest Period determined in accordance with the
provisions of paragraph (b) above is greater than such Maximum Rate of Interest, the Rate of Interest
for such Interest Period shall be such Maximum Rate of Interest.

(d)    Determination of Rate of Interest and calculation of Interest Amounts

The Fiscal Agent or, as applicable, the Registrar, in the case of Floating Rate Notes, and the
Calculation Agent, in the case of Index Linked Interest Notes, will at or as soon as practicable after
each time at which the Rate of Interest is to be determined, determine the Rate of Interest for the
relevant Interest Period. In the case of Index Linked Interest Notes, the Calculation Agent will notify
the Fiscal Agent of the Rate of Interest for the relevant Interest Period as soon as practicable after
calculating the same.

The Fiscal Agent or, as applicable, the Registrar, in the case of Floating Rate Notes, will calculate the
amount of interest (the Interest Amount) payable on the Floating Rate Notes or Index Linked Interest
Notes in respect of each Specified Denomination for the relevant Interest Period. Each Interest
Amount shall be calculated by applying the Rate of Interest to:

(i)    in the case of Floating Rate Notes or Index Linked Interest Notes which are represented by a
       Global Note, the aggregate outstanding nominal amount of the Notes represented by such Global
       Note (or, if they are Partly Paid Notes, the aggregate amount paid up); or

(ii)   in the case of Floating Rate Notes or Index Linked Interest Notes in definitive form, the
       Calculation Amount,

and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the
resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit
being rounded upwards or otherwise in accordance with applicable market convention. Where the
Specified Denomination of a Floating Rate Note or an Index Linked Interest Note in definitive form


                                                   39
is a multiple of the Calculation Amount, the Interest Amount payable in respect of such Note shall be
the product of the amount (determined in the manner provided above) for the Calculation Amount and
the amount by which the Calculation Amount is multiplied to reach the Specified Denomination,
without any further rounding.


Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with
this Condition 5.2:

(i)    if “Actual/Actual (ISDA)” or “Actual/Actual” is specified in the applicable Final Terms, the
       actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest
       Period falls in a leap year, the sum of (I) the actual number of days in that portion of the Interest
       Period falling in a leap year divided by 366 and (II) the actual number of days in that portion
       of the Interest Period falling in a non-leap year divided by 365);

(ii)   if “Actual/365 (Fixed)” is specified in the applicable Final Terms, the actual number of days in
       the Interest Period divided by 365;

(iii) if “Actual/365 (Sterling)” is specified in the applicable Final Terms, the actual number of days
      in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling in a leap
       year, 366;


(iv) if “Actual/360” is specified in the applicable Final Terms, the actual number of days in the
     Interest Period divided by 360;

(v)    if “30/360”, “360/360” or “Bond Basis” is specified in the applicable Final Terms, the number
       of days in the Interest Period divided by 360, calculated on a formula basis as follows:

                                    [360 x(Y 2 - Y 1 )] + [30 x(M 2 - M 1 )] + (D 2 - D 1 )
       Day Count Fraction =
                                                            360

       where:


       “Y 1 ” is the year, expressed as a number, in which the first day of the Interest Period falls;

       “Y 2 ” is the year, expressed as a number, in which the day immediately following the last day of
       the Interest Period falls;

       “M 1 ” is the calendar month, expressed as a number, in which the first day of the Interest Period
       falls;


       “M 2 ” is the calendar month, expressed as a number, in which the day immediately following the
       last day of the Interest Period falls;

       “D 1 ” is the first calendar day, expressed as a number, of the Interest Period, unless such number
       is 31, in which case D 1 will be 30; and

       “D 2 ” is the calendar day, expressed as a number, immediately following the last day included in
       the Interest Period, unless such number would be 31 and D 1 is greater than 29, in which case D 2
       will be 30;



                                                      40
(vi) if “30E/360” or “Eurobond Basis” is specified in the applicable Final Terms, the number of days
     in the Interest Period divided by 360, calculated on a formula basis as follows:

                                 [360 x(Y 2 - Y 1 )] + [30 x(M 2 - M 1 )] + (D 2 - D 1 )
     Day Count Fraction =
                                                         360

     where:


     “Y 1 ” is the year, expressed as a number, in which the first day of the Interest Period falls;

     “Y 2 ” is the year, expressed as a number, in which the day immediately following the last day of
     the Interest Period falls;

     “M 1 ” is the calendar month, expressed as a number, in which the first day of the Interest Period
     falls;

     “M 2 ” is the calendar month, expressed as a number, in which the day immediately following the
     last day of the Interest Period falls;

     “D 1 ” is the first calendar day, expressed as a number, of the Interest Period, unless such number
     would be 31, in which case D 1 will be 30; and


     “D 2 ” is the calendar day, expressed as a number, immediately following the last day included in
     the Interest Period, unless such number would be 31, in which case D 2 will be 30;

(vii) if “30E/360 (ISDA)” is specified in the applicable Final Terms, the number of days in the Interest
     Period divided by 360, calculated on a formula basis as follows:

                                 [360 x(Y 2 - Y 1 )] + [30 x(M 2 - M 1 )] + (D 2 - D 1 )
     Day Count Fraction =
                                                         360

     where:


     “Y 1 ” is the year, expressed as a number, in which the first day of the Interest Period falls;

     “Y 2 ” is the year, expressed as a number, in which the day immediately following the last day of
     the Interest Period falls;

     “M 1 ” is the calendar month, expressed as a number, in which the first day of the Interest Period
     falls;

     “M 2 ” is the calendar month, expressed as a number, in which the day immediately following the
     last day of the Interest Period falls;

     “D 1 ” is the first calendar day, expressed as a number, of the Interest Period, unless (i) that day
     is the last day of February or (ii) such number would be 31, in which case D 1 will be 30; and

     “D 2 ” is the calendar day, expressed as a number, immediately following the last day included in
     the Interest Period, unless (i) that day is the last day of February but not the Maturity Date or
     (ii) such number would be 31, in which case D 2 will be 30.



                                                   41
(e)   Notification of Rate of Interest and Interest Amounts

The Fiscal Agent or the Registrar will cause the Rate of Interest and each Interest Amount for each
Interest Period and the relevant Interest Payment Date to be notified to the Issuer (by no later than the
first day of each Interest Period) and notice thereof to be published in accordance with Condition 14
as soon as possible after their determination but in no event later than the fourth Singapore Business
Day thereafter. Each Interest Amount and Interest Payment Date so notified may subsequently be
amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in
the event of an extension or shortening of the Interest Period. Any such amendment will be promptly
notified to each stock exchange on which the relevant Floating Rate Notes or Index Linked Interest
Notes are for the time being listed and to the Noteholders in accordance with Condition 14. For the
purposes of this paragraph, the expression Singapore Business Day means a day (other than a
Saturday or a Sunday) on which banks and foreign exchange markets are open for general business in
Singapore.

(f)   Certificates to be final

All certificates, communications, opinions, determinations, calculations, quotations and decisions
given, expressed, made or obtained for the purposes of the provisions of this Condition 5.2, whether
by the Fiscal Agent or the Registrar or Calculation Agent shall (in the absence of wilful default, fraud,
manifest error or proven error) be binding on the Issuer, the Fiscal Agent, the Calculation Agent (if
applicable), the Registrar (if applicable), the other Paying Agents and all Noteholders, Receiptholders
and Couponholders and (in the absence of negligence, wilful default or fraud) no liability to the Issuer,
the Noteholders, the Receiptholders or the Couponholders shall attach to the Fiscal Agent or the
Registrar or Calculation Agent in connection with the exercise or non-exercise by it of its powers,
duties and discretions pursuant to such provisions.

5.3   Interest on Dual Currency Interest Notes

The rate or amount of interest payable in respect of Dual Currency Interest Notes shall be determined
in the manner specified in the applicable Final Terms.

5.4   Interest on Partly Paid Notes

In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest
will accrue as aforesaid on the paid-up nominal amount of such Notes and otherwise as specified in
the applicable Final Terms.

5.5   Accrual of interest

Each Note (or in the case of the redemption of part only of a Note, that part only of such Note) will
cease to bear interest (if any) from the date for its redemption unless, upon due presentation thereof,
payment of principal is improperly withheld or refused. In such event, interest will continue to accrue
until whichever is the earlier of:

(a)   the date on which all amounts due in respect of such Note have been paid; and

(b)   five days after the date on which the full amount of the moneys payable in respect of such Note
      has been received by the Fiscal Agent and notice to that effect has been given to the Noteholders
      in accordance with Condition 14.


                                                   42
6.    PAYMENTS

6.1   Method of payment

Subject as provided below:

(a)   payments in a Specified Currency other than euro will be made by credit or transfer to an account
      in the relevant Specified Currency maintained by the payee with, or, at the option of the payee,
      by a cheque in such Specified Currency drawn on, a bank in the principal financial centre of the
      country of such Specified Currency; and

(b)   payments in euro will be made by credit or transfer to a euro account (or any other account to
      which euro may be credited or transferred) specified by the payee or, at the option of the payee,
      by a euro cheque.

Payments will be subject in all cases to any fiscal or other laws and regulations applicable thereto in
the place of payment, but without prejudice to the provisions of Condition 8.

6.2   Presentation of Definitive Bearer Notes, Receipts and Coupons

Payments of principal in respect of Definitive Bearer Notes will (subject as provided below) be made
in the manner provided in Condition 6.1 above only against presentation and surrender (or, in the case
of part-payment of any sum due, endorsement) of Definitive Bearer Notes, and payments of interest
in respect of Definitive Bearer Notes will (subject as provided below) be made as aforesaid only
against presentation and surrender (or, in the case of part-payment of any sum due, endorsement) of
Coupons, in each case at the specified office of any Paying Agent outside the United States (which
expression, as used herein, means the United States of America (including the States and the District
of Columbia, its territories, its possessions and other areas subject to its jurisdiction)).

Payments of instalments of principal (if any) in respect of Definitive Bearer Notes, other than the final
instalment, will (subject as provided below) be made in the manner provided in Condition 6.1 above
only against presentation and surrender (or, in the case of part-payment of any sum due, endorsement)
of the relevant Receipt in accordance with the preceding paragraph. Payment of the final instalment
will be made in the manner provided in Condition 6.1 above only against presentation and surrender
(or, in the case of part-payment of any sum due, endorsement) of the relevant Bearer Note in
accordance with the preceding paragraph. Each Receipt must be presented for payment of the relevant
instalment together with the Definitive Bearer Note to which it appertains. Receipts presented without
the Definitive Bearer Note to which they appertain do not constitute valid obligations of the Issuer.
Upon the date on which any Definitive Bearer Note becomes due and repayable, unmatured Receipts
(if any) relating thereto (whether or not attached) shall become void and no payment shall be made
in respect thereof.

Fixed Rate Notes in definitive bearer form (other than Dual Currency Notes, Index Linked Notes or
Long Maturity Notes (as defined below)) should be presented for payment together with all unmatured
Coupons appertaining thereto (which expression shall for this purpose include Coupons falling to be
issued on exchange of matured Talons), failing which the amount of any missing unmatured Coupon
(or, in the case of payment not being made in full, the same proportion of the amount of such missing
unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the sum due for
payment. Each amount of principal so deducted will be paid in the manner mentioned above against
surrender of the relative missing Coupon at any time before the expiry of 10 years after the Relevant
Date (as defined in Condition 8) in respect of such principal (whether or not such Coupon would
otherwise have become void under Condition 9) or, if later, five years from the date on which such
Coupon would otherwise have become due, but in no event thereafter.


                                                   43
Upon any Fixed Rate Note in definitive bearer form becoming due and repayable prior to its Maturity
Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will
be issued in respect thereof.

Upon the date on which any Floating Rate Note, Dual Currency Note, Index Linked Note or Long
Maturity Note in definitive bearer form becomes due and repayable, unmatured Coupons and Talons
(if any) relating thereto (whether or not attached) shall become void and no payment or, as the case
may be, exchange for further Coupons shall be made in respect thereof. A Long Maturity Note is a
Fixed Rate Note (other than a Fixed Rate Note which on issue had a Talon attached) whose nominal
amount on issue is less than the aggregate interest payable thereon provided that such Note shall cease
to be a Long Maturity Note on the Interest Payment Date on which the aggregate amount of interest
remaining to be paid after that date is less than the nominal amount of such Note.

If the due date for redemption of any Definitive Bearer Note is not an Interest Payment Date, interest
(if any) accrued in respect of such Note from (and including) the preceding Interest Payment Date or,
as the case may be, the Interest Commencement Date shall be payable only against surrender of the
relevant Definitive Bearer Note.

6.3   Payments in respect of Bearer Global Notes

Payments of principal and interest (if any) in respect of Bearer Notes represented by any Global Note
will (subject as provided below) be made in the manner specified above in relation to Definitive
Bearer Notes and otherwise in the manner specified in the relevant Global Note against presentation
or surrender, as the case may be, of such Global Note at the specified office of any Paying Agent
outside the United States. A record of each payment made against presentation or surrender of any
Global Note in bearer form, distinguishing between any payment of principal and any payment of
interest, will be made on such Global Note by the Paying Agent to which it was presented and such
record shall be prima facie evidence that the payment in question has been made.

6.4   Payments in respect of Registered Notes

Payments of principal (other than instalments of principal prior to the final instalment) in respect of
each Registered Note (whether or not in global form) will be made against presentation and surrender
(or, in the case of part-payment of any sum due, endorsement) of the Registered Note at the specified
office of the Registrar or any of the Paying Agents. Such payments will be made by transfer to the
Designated Account (as defined below) of the holder (or the first named of joint holders) of the
Registered Note appearing in the register of holders of the Registered Notes maintained by the
Registrar (the Register) at the close of business on the third business day (being for this purpose a
day on which banks are open for business in the city where the specified office of the Registrar is
located) before the relevant due date. Notwithstanding the previous sentence, if: (i) a holder does not
have a Designated Account; or (ii) the principal amount of the Notes held by a holder is less than
US$250,000 (or its approximate equivalent in any other Specified Currency), payment will instead be
made by a cheque in the Specified Currency drawn on a Designated Bank (as defined below). For these
purposes, Designated Account means the account (which, in the case of a payment in Japanese yen
to a non-resident of Japan, shall be a non-resident account) maintained by a holder with a Designated
Bank and identified as such in the Register and Designated Bank means (in the case of payment in
a Specified Currency other than euro) a bank in the principal financial centre of the country of such
Specified Currency and (in the case of a payment in euro) any bank which processes payments in euro.

Payments of interest and payments of instalments of principal (other than the final instalment) in
respect of each Registered Note (whether or not in global form) will be made by a cheque in the
Specified Currency drawn on a Designated Bank and mailed by uninsured mail on the business day


                                                  44
in the city where the specified office of the Registrar is located immediately preceding the relevant
due date to the holder (or the first named of joint holders) of the Registered Note appearing in the
Register at the close of business on the fifteenth day (whether or not such fifteenth day is a business
day) before the relevant due date (the Record Date) at his address shown in the Register on the Record
Date and at his risk. Upon application of the holder to the specified office of the Registrar not less
than three business days in the city where the specified office of the Registrar is located before the
due date for any payment of interest in respect of a Registered Note, the payment may be made by
transfer on the due date in the manner provided in the preceding paragraph. Any such application for
transfer shall be deemed to relate to all future payments of interest (other than interest due on
redemption) and instalments of principal (other than the final instalment) in respect of the Registered
Notes which become payable to the holder who has made the initial application until such time as the
Registrar is notified in writing to the contrary by such holder. Payment of the interest due in respect
of each Registered Note on redemption and the final instalment of principal will be made in the same
manner as payment of the principal amount of such Registered Note.

Holders of Registered Notes will not be entitled to any interest or other payment for any delay in
receiving any amount due in respect of any Registered Note as a result of a cheque posted in
accordance with this Condition arriving after the due date for payment or being lost in the post. No
commissions or expenses shall be charged to such holders by the Registrar in respect of any payments
of principal or interest in respect of the Registered Notes.

None of the Issuer or the Paying Agents or the Transfer Agents will have any responsibility or liability
for any aspect of the records relating to, or payments made on account of, beneficial ownership
interests in the Registered Global Notes or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.

6.5   General provisions applicable to payments

The holder of a Global Note shall be the only person entitled to receive payments in respect of Notes
represented by such Global Note and the Issuer will be discharged by payment to, or to the order of,
the holder of such Global Note in respect of each amount so paid. Each of the persons shown in the
records of Euroclear or Clearstream, Luxembourg as the beneficial holder of a particular nominal
amount of Notes represented by such Global Note must look solely to Euroclear or Clearstream,
Luxembourg, as the case may be, for his share of each payment so made by the Issuer or to the order
of, the holder of such Global Note.

Notwithstanding the foregoing provisions of this Condition, if any amount of principal and/or interest
in respect of Notes is payable in U.S. dollars, such U.S. dollar payments of principal and/or interest
in respect of such Notes will be made at the specified office of a Paying Agent in the United States
if:

(a)   the Issuer has appointed Paying Agents with specified offices outside the United States with the
      reasonable expectation that such Paying Agents would be able to make payment in U.S. dollars
      at such specified offices outside the United States of the full amount of principal and interest on
      the Notes in the manner provided above when due;

(b)   payment of the full amount of such principal and interest at all such specified offices outside the
      United States is illegal or effectively precluded by exchange controls or other similar restrictions
      on the full payment or receipt of principal and interest in U.S. dollars; and

(c)   such payment is then permitted under United States law without involving, in the opinion of the
      Issuer, adverse tax consequences to the Issuer.


                                                    45
6.6   Payment Day

If the date for payment of any amount in respect of any Note, Receipt or Coupon is not a Payment Day,
the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant
place and shall not be entitled to further interest or other payment in respect of such delay. For these
purposes, Payment Day means any day which (subject to Condition 9) is:

(a)   a day on which commercial banks and foreign exchange markets settle payments and are open
      for general business (including dealing in foreign exchange and foreign currency deposits) in:

      (i)    the relevant place of presentation;

      (ii)   Singapore;

      (iii) Hong Kong;

      (iv) London; or

      (v)    each Additional Financial Centre specified in the applicable Final Terms; and

(b)   either (A) in relation to any sum payable in a Specified Currency other than euro, a day on which
      commercial banks and foreign exchange markets settle payments and are open for general
      business (including dealing in foreign exchange and foreign currency deposits) in the principal
      financial centre of the country of the relevant Specified Currency (if other than the place of
      presentation, Singapore, Hong Kong, London and any Additional Financial Centre) or (B) in
      relation to any sum payable in euro, a day on which the TARGET2 System is open.

6.7   Interpretation of principal and interest

Any reference in the Conditions to principal in respect of the Notes shall be deemed to include, as
applicable:

(a)   any additional amounts which may be payable with respect to principal under Condition 8;

(b)   the Final Redemption Amount of the Notes;

(c)   the Early Redemption Amount of the Notes;

(d)   the Optional Redemption Amount(s) (if any) of the Notes;

(e)   in relation to Notes redeemable in instalments, the Instalment Amounts;

(f)   in relation to Zero Coupon Notes, the Amortised Face Amount (as defined in Condition 7.5); and

(g)   any premium and any other amounts (other than interest) which may be payable by the Issuer
      under or in respect of the Notes.

Any reference in the Conditions to interest in respect of the Notes shall be deemed to include, as
applicable, any additional amounts which may be payable with respect to interest under Condition 8.


                                                   46
7.    REDEMPTION AND PURCHASE

7.1   Redemption at maturity

Unless previously redeemed or purchased and cancelled as specified below, each Note (including each
Index Linked Redemption Note and Dual Currency Redemption Note) will be redeemed by the Issuer
at its Final Redemption Amount specified in, or determined in the manner specified in, the applicable
Final Terms in the relevant Specified Currency on the Maturity Date.

7.2   Redemption for tax reasons

The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time (if this
Note is neither a Floating Rate Note, an Index Linked Interest Note nor a Dual Currency Interest Note)
or on any Interest Payment Date (if this Note is either a Floating Rate Note, an Index Linked Interest
Note or a Dual Currency Interest Note), on giving not less than 30 nor more than 60 days’ notice to
the Fiscal Agent and, in accordance with Condition 14, the Noteholders (which notice shall be
irrevocable), if:

(a)   on the occasion of the next payment due under the Notes, the Issuer has or will become obliged
      to pay additional amounts as provided or referred to in Condition 8 as a result of any change in,
      or amendment to, the laws or regulations of a Tax Jurisdiction (as defined in Condition 8) or any
      change in the application or official interpretation of such laws or regulations, which change or
      amendment becomes effective on or after the date on which agreement is reached to issue the
      first Tranche of the Notes; and

(b)   such obligation cannot be avoided by the Issuer taking reasonable measures available to it,

provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date
on which the Issuer would be obliged to pay such additional amounts were a payment in respect of
the Notes then due.

Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer shall deliver
to the Fiscal Agent a certificate signed by two Directors of the Issuer stating that the Issuer is entitled
to effect such redemption and setting forth a statement of facts showing that the conditions precedent
to the right of the Issuer so to redeem have occurred, and an opinion of independent legal advisers of
recognised standing to the effect that the Issuer has or will become obliged to pay such additional
amounts as a result of such change or amendment.

Notes redeemed pursuant to this Condition 7.2 will be redeemed at their Early Redemption Amount
referred to in Condition 7.5 below together (if appropriate) with interest accrued to (but excluding)
the date of redemption.

7.3   Redemption at the option of the Issuer (Issuer Call)

If Issuer Call is specified in the applicable Final Terms, the Issuer may, having given:

(a)   not less than 15 nor more than 30 days’ notice to the Noteholders (in accordance with Condition
      14); and

(b)   not less than 15 days before the giving of the notice referred to in (a) above, notice to the Fiscal
      Agent and, in the case of a redemption of Registered Notes, the Registrar,


                                                    47
(which notices shall be irrevocable and shall specify the date fixed for redemption), redeem all or
some only of the Notes then outstanding on any Optional Redemption Date and at the Optional
Redemption Amount(s) specified in, or determined in the manner specified in, the applicable Final
Terms together, if appropriate, with interest accrued to (but excluding) the relevant Optional
Redemption Date. Any such redemption must be of a nominal amount not less than the Minimum
Redemption Amount and not more than the Maximum Redemption Amount, in each case as may be
specified in the applicable Final Terms.

In the case of a partial redemption of Definitive Bearer Notes or Registered Notes, the Notes to be
redeemed (Redeemed Notes) will be selected individually by lot (in such place as the Fiscal Agent,
in the case of Bearer Notes, or the Registrar, in the case of Registered Notes, may approve) not more
than 60 days prior to the date fixed for redemption and a list of the Notes called for redemption will
be given notice in accordance with Condition 14 not less than 30 days prior to such date fixed for
redemption (such date of selection being the Selection Date).

In the case of partial redemption of Bearer Notes which are represented by a Bearer Global Note, the
relevant Bearer Notes will be selected in accordance with the rules of Euroclear and/or Clearstream,
Luxembourg. If only some of the Notes then outstanding are to be so redeemed, the Optional
Redemption Amount (after accounting for any interest accrued to (but excluding) the relevant Optional
Redemption Date) shall be an amount that is (A) equal to or greater than the Minimum Redemption
Amount and (B) equal to or less than the Maximum Redemption Amount.

In the case of Redeemed Notes represented by definitive Notes, a list of the serial numbers of such
Redeemed Notes will be published in accordance with Condition 14 not less than 15 days prior to the
date fixed for redemption. No exchange of the relevant Global Note will be permitted during the
period from (and including) the Selection Date to (and including) the date fixed for redemption
pursuant to this Condition 7.3 and notice to that effect shall be given by the Issuer to the Noteholders
in accordance with Condition 14 at least five days prior to the Selection Date.

7.4   Redemption at the option of the Noteholders (Investor Put)

If Investor Put is specified in the applicable Final Terms, upon the holder of any Note giving to the
Issuer in accordance with Condition 14 not less than 15 nor more than 30 days’ notice the Issuer will,
upon the expiry of such notice, redeem, subject to, and in accordance with, the terms specified in the
applicable Final Terms, such Note on the Optional Redemption Date and at the Optional Redemption
Amount together, if appropriate, with interest accrued to (but excluding) the Optional Redemption
Date. Registered Notes may be redeemed under this Condition 7.4 in any multiple of their lowest
Specified Denomination. It may be that before an Investor Put can be exercised, certain conditions
and/or circumstances will need to be satisfied. Where relevant, the provisions will be set out in the
applicable Final Terms.

To exercise the right to require redemption of this Note the holder of this Note must, if this Note is
in definitive form and held outside Euroclear and Clearstream, Luxembourg, deliver, at the specified
office of any Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered
Notes) at any time during the normal business hours of such Paying Agent or, as the case may be, the
Registrar falling within the notice period, a duly completed and signed notice of exercise in the form
(for the time being current) obtainable from any specified office of any Paying Agent or, as the case
may be, the Registrar (a Put Notice) and in which the holder must specify a bank account (or, if
payment is required to be made by cheque, an address) to which payment is to be made under this
Condition and, in the case of Registered Notes, the nominal amount thereof to be redeemed and, if less
than the full nominal amount of the Registered Notes so surrendered is to be redeemed, an address to
which a new Registered Note in respect of the balance of such Registered Notes is to be sent subject


                                                  48
to and in accordance with the provisions of Condition 2(b). If this Note is a Definitive Bearer Note,
the Put Notice must be accompanied by this Note or evidence satisfactory to the Paying Agent
concerned that this Note will, following delivery of the Put Notice, be held to its order or under its
control.


If this Note is represented by a Global Note or is in definitive form and held through Euroclear or
Clearstream, Luxembourg, to exercise the right to require redemption of this Note the holder of this
Note must, within the notice period, give notice to the Fiscal Agent of such exercise in accordance
with the standard procedures of Euroclear and Clearstream, Luxembourg (which may include notice
being given on his instruction by Euroclear or Clearstream, Luxembourg or any common depositary
for them to the Fiscal Agent by electronic means) in a form acceptable to Euroclear and Clearstream,
Luxembourg from time to time and, if this Note is represented by a Global Note, at the same time
present or procure the presentation of the relevant Global Note to the Fiscal Agent for notation
accordingly.

Any Put Notice or other notice given in accordance with the standard procedures of Euroclear and
Clearstream, Luxembourg given by a holder of any Note pursuant to this Condition 7.4 shall be
irrevocable except where, prior to the due date of redemption, an Event of Default has occurred and
is continuing, in which event such holder, at its option, may elect by notice to the Issuer to withdraw
the notice given pursuant to this Condition 7.4 and instead to declare such Note forthwith due and
payable pursuant to Condition 10.


7.5   Early Redemption Amounts

For the purpose of Condition 7.2 above and Condition 10, each Note will be redeemed at its Early
Redemption Amount calculated as follows:

(a)   in the case of a Note (other than a Zero Coupon Note, an Instalment Note and a Partly Paid Note)
      with a Final Redemption Amount equal to the Issue Price, at the Final Redemption Amount
      thereof;

(b)   in the case of a Note (other than a Zero Coupon Note but including an Instalment Note and a
      Partly Paid Note) with a Final Redemption Amount which is or may be less or greater than the
      Issue Price or which is payable in a Specified Currency other than that in which the Note is
      denominated, at the amount specified in, or determined in the manner specified in, the applicable
      Final Terms or, if no such amount or manner is so specified in the applicable Final Terms, at its
      nominal amount; or

(c)   in the case of a Zero Coupon Note, at an amount (the Amortised Face Amount) calculated in
      accordance with the following formula:

      Early Redemption Amount = RP x (1 + AY) y

      where:

      RP           means the Reference Price;

      AY           means the Accrual Yield expressed as a decimal; and




                                                  49
      y
                     is a fraction the numerator of which is equal to the number of days (calculated on
                     the basis of a 360-day year consisting of 12 months of 30 days each) from (and
                     including) the Issue Date of the first Tranche of the Notes to (but excluding) the
                     date fixed for redemption or (as the case may be) the date upon which such Note
                     becomes due and repayable and the denominator of which is 360,

      or on such other calculation basis as may be specified in the applicable Final Terms.


7.6   Instalments

Instalment Notes will be redeemed in the Instalment Amounts and on the Instalment Dates. In the case
of early redemption, the Early Redemption Amount will be determined pursuant to Condition 7.5.

7.7   Partly Paid Notes


Partly Paid Notes will be redeemed, whether at maturity, early redemption or otherwise, in accordance
with the provisions of this Condition and the applicable Final Terms.

7.8   Purchases


The Issuer or any Subsidiary of the Issuer may at any time purchase Notes (provided that, in the case
of Definitive Bearer Notes, all unmatured Receipts, Coupons and Talons appertaining thereto are
purchased therewith) at any price in the open market or otherwise. All Notes so purchased will be
surrendered to a Paying Agent for cancellation.


7.9   Cancellation

All Notes which are redeemed will forthwith be cancelled (together with, in the case of Definitive
Bearer Notes, all unmatured Receipts, Coupons and Talons attached thereto or surrendered therewith
at the time of redemption). All Notes so cancelled and the Notes purchased and cancelled pursuant to
Condition 7.7 above (together with, in the case of Definitive Bearer Notes, all unmatured Receipts,
Coupons and Talons cancelled therewith) shall be forwarded to the Fiscal Agent and cannot be
reissued or resold.

7.10 Late payment on Zero Coupon Notes

If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note
pursuant to Condition 7.1, 7.2, 7.3 or 7.4 above or upon its becoming due and repayable as provided
in Condition 10 is improperly withheld or refused, the amount due and repayable in respect of such
Zero Coupon Note shall be the amount calculated as provided in Condition 7.5(c) above as though the
references therein to the date fixed for the redemption or the date upon which such Zero Coupon Note
becomes due and payable were replaced by references to the date which is the earlier of:

(a)   the date on which all amounts due in respect of such Zero Coupon Note have been paid; and


(b)   five days after the date on which the full amount of the moneys payable in respect of such Zero
      Coupon Notes has been received by the Fiscal Agent and notice to that effect has been given to
      the Noteholders in accordance with Condition 14.




                                                   50
8.     TAXATION

All payments of principal and interest in respect of the Notes, Receipts and Coupons by the Issuer will
be made without withholding or deduction for or on account of any present or future taxes or duties
of whatever nature imposed or levied by or on behalf of any Tax Jurisdiction unless such withholding
or deduction is required by law. In such event, the Issuer will pay such additional amounts as shall
be necessary in order that the net amounts received by the holders of the Notes, Receipts or Coupons
after such withholding or deduction shall equal the respective amounts of principal and interest which
would otherwise have been receivable in respect of the Notes, Receipts or Coupons, as the case may
be, in the absence of such withholding or deduction; except that no such additional amounts shall be
payable with respect to any Note, Receipt or Coupon:

(a)    presented for payment in Singapore; or

(b)    the holder of which is liable for such taxes or duties in respect of such Note, Receipt or Coupon
       by reason of his having some connection with a Tax Jurisdiction other than the mere holding of
       such Note, Receipt or Coupon; or

(c)    presented for payment more than 30 days after the Relevant Date (as defined below) except to
       the extent that the holder thereof would have been entitled to an additional amount on presenting
       the same for payment on such thirtieth day assuming that day to have been a Payment Day (as
       defined in Condition 6.6); or

(d)    where such withholding or deduction is imposed on a payment to an individual and is required
       to be made pursuant to European Council Directive 2003/48/EC on the taxation of savings
       income or any law implementing or complying with, or introduced in order to conform to, such
       Directive; or

(e)    presented for payment by or on behalf of a holder who would have been able to avoid such
       withholding or deduction by presenting the relevant Note, Receipt or Coupon to another Paying
       Agent in a Member State of the European Union.

As used herein:

(i)    Tax Jurisdiction means Singapore or the country in which any branch of the Bank issuing the
       Notes is located or, in either case, any political subdivision or any authority thereof or therein
       having power to tax; and

(ii)   the Relevant Date means the date on which such payment first becomes due, except that, if the
       full amount of the moneys payable has not been duly received by the Fiscal Agent on or prior
       to such due date, it means the date on which, the full amount of such moneys having been so
       received, notice to that effect is duly given to the Noteholders in accordance with Condition 14.

9.     PRESCRIPTION

The Notes (whether in bearer or registered form), Receipts and Coupons will become void unless
presented for payment within a period of 10 years (in the case of principal) and five years (in the case
of interest) after the Relevant Date (as defined in Condition 8) therefor.

There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim
for payment in respect of which would be void pursuant to this Condition or Condition 6.2 or any
Talon which would be void pursuant to Condition 6.2.


                                                    51
10.   EVENTS OF DEFAULT

10.1 Events of Default

If any one or more of the following events (each an Event of Default) shall occur and be continuing:

(a)   Non-payment: default is made in the payment of any amount of principal or interest in respect
      of the Notes on the due date for payment thereof and such default remains unremedied for five
      days or, in the case of default in the payment of interest, seven days thereafter; or

(b)   Breach of other obligations: default is made in the performance or observance of any other
      obligation of the Issuer under or in respect of the Notes or these Terms and Conditions and such
      default remains unremedied for 21 days after written notice thereof, addressed to the Issuer by
      any holder of Notes, has been delivered to the Issuer; or

(c)   Cross-default: (1) any Indebtedness for Borrowed Money (as defined below) of the Issuer
      becomes due and repayable prematurely by reason of an event of default (however described);
      (2) the Issuer fails to make any payment in respect of any Indebtedness for Borrowed Money on
      the due date for payment; (3) any security given by the Issuer for any Indebtedness for Borrowed
      Money becomes enforceable; or (4) default is made by the Issuer in making any payment due
      under any guarantee and/or indemnity given by it in relation to any Indebtedness for Borrowed
      Money of any other person; provided that no event described in this subparagraph (c) shall
      constitute an Event of Default unless the relevant amount of Indebtedness for Borrowed Money
      or other relative liability due and unpaid, either alone or when aggregated (without duplication)
      with other amounts of Indebtedness for Borrowed Money and/or other liabilities due and unpaid
      relative to all (if any) other events specified in (1) to (4) above, amounts to at least
      U.S.$15,000,000 (or its equivalent in any other currency); or

(d)   Enforcement proceedings: a distress, attachment, execution, seizure before judgment or other
      legal process is levied, enforced or sued out upon or against any of the assets or revenues of the
      Issuer and is not discharged or stayed within 60 days except where such proceedings would not
      lead to a Material Adverse Effect; or

(e)   Security enforced: a secured party takes possession, or a receiver, manager or other similar
      officer is appointed, of the whole or any part of the undertaking, assets and revenues of the Issuer
      except where such enforcement of security would not lead to a Material Adverse Effect; or

(f)   Insolvency, etc: the Issuer stops or threatens to stop payment of, or is unable to, or admits
      inability to, pay, its debts (or any class of its debts) as they fall due or is deemed unable to pay
      its debts pursuant to or for the purposes of any applicable law, or is adjudicated or found
      bankrupt or insolvent; or

(g)   Winding up: an order is made or an effective resolution is passed for the winding up of the Issuer;
      or

(h)   Cessation of Business: the Issuer ceases or threatens to cease to carry on all or substantially all
      of its business or operations, except (i) for the purposes of, or pursuant to and followed by a
      consolidation, merger or sale of assets permitted under Condition 15.2; (ii) for the purposes of
      or pursuant to and followed by a consolidation, amalgamation, merger or reorganisation (other
      than as described in (i) above) the terms of which shall have previously been approved by an
      Extraordinary Resolution of the Noteholders; or


                                                    52
(i)   Nationalisation: any step is taken by any person with a view to the seizure, compulsory
      acquisition, expropriation or nationalisation of the Issuer or all or a substantial part of the
      Issuer’s assets; or

(j)   Illegality: it is unlawful for the Issuer to perform or comply with any one or more of its
      obligations under any of the Notes; or

(k)   Consent and authorisations: any action, condition or thing (including the obtaining or effecting
      of any necessary consent, approval, authorisation, exemption, filing, licence, order, recording or
      registration) at any time required to be taken, fulfilled or done in order (A) to enable the Issuer
      lawfully to enter into, exercise its rights and perform and comply with its obligations under the
      Notes, (B) to ensure that those obligations are legally binding and enforceable, and to make the
      Notes admissible in evidence in the courts of England is not taken, fulfilled or done; or

(l)   Analogous event: any event occurs which, under the laws of any relevant jurisdiction, has an
      analogous effect to any of the events referred to in the preceding 11 subparagraphs,

then the holder of any Note may, by written notice addressed and delivered to the Issuer or to the
Fiscal Agent or the Registrar, as applicable, in accordance with Condition 11, declare such Note to be
immediately due and payable whereupon it shall become immediately due and payable at its Early
Redemption Amount together with accrued interest without further action or formality. Any such
notice shall specify the serial number of each Note in respect of which it is given.

10.2 Interpretation

In these Conditions:

(a)   Indebtedness for Borrowed Money means any indebtedness (whether being principal, premium,
      interest or other amounts) for or in respect of any notes, bonds, debentures, debenture stock, loan
      stock or other securities or any borrowed money or any liability under or in respect of any
      acceptance or acceptance credit; and

(b)   Person means any individual, company, corporation, firm, partnership, joint venture,
      association, organisation, state, agency of a state or other entity, whether or not having a separate
      legal personality.

(c)   Material Adverse Effect means (a) a material adverse effect, or any development involving a
      prospective material adverse effect, or (i) the condition (financial or otherwise), results of
      operations, business, properties, shareholders’ equity, prospects or general affairs of the Issuer
      or the Group or (ii) the obility of the Issuer to perform its obligations under the Notes or (iii)
      the rights of the Noteholders under the Bonds; or (b) an effect which is otherwise materially
      adverse in the context of the issue or offering of the Notes.

(d)   a Subsidiary means, in relation to the Issuer, any company (i) in which the Issuer holds a
      majority of the voting rights or (ii) of which the Issuer is a member and has the right to appoint
      or remove a majority of the board of directors or (iii) of which the Issuer is a member and
      controls a majority of the voting rights, and includes any company which is a Subsidiary of a
      Subsidiary of the Issuer.

(e)   Group means the Issue and its Subsidiaries, taken as a whole.


                                                    53
11.   REPLACEMENT OF NOTES, RECEIPTS, COUPONS AND TALONS

Should any Note, Receipt, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be
replaced at the specified office of the Fiscal Agent or, as the case may be, the Registrar, upon payment
by the claimant of such costs and expenses as may be incurred in connection therewith and on such
terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Notes,
Receipts, Coupons or Talons must be surrendered before replacements will be issued.

12.   AGENTS

The names of the initial Paying Agents and their initial specified offices in the case of a Bearer Note
and the name and initial specified office of the initial Registrar in the case of a Registered Note and
the Fiscal Agent are set out below.

The Issuer is entitled to vary or terminate the appointment of the Registrar or any Paying Agent and/or
appoint additional or other Paying Agents, Registrar or Transfer Agents and/or approve any change in
the specified office through which any Paying Agent and/or Registrar and/or Transfer Agent acts,
provided that:

(a)   there will at all times be a Fiscal Agent and a Registrar;

(b)   so long as the Notes are listed on any stock exchange or admitted to listing by any other relevant
      authority, there will at all times be a Paying Agent with a specified office in such place as may
      be required by the rules and regulations of the relevant stock exchange or other relevant
      authority;

(c)   there will at all times be a Registrar and a Transfer Agent which, so long as Registered Notes
      are listed on any stock exchange or admitted to listing by any other relevant authority, will have
      a specified office in such place as may be required by the rules and regulations of the relevant
      stock exchange or other relevant authority;

(d)   there will at all times be a Paying Agent in a Member State of the European Union that will not
      be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any
      law implementing or complying with, or introduced in order to conform to, such Directive; and

(e)   so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, if the
      Notes are issued in definitive form, there will at all times be a Paying Agent in Singapore.

In addition, the Issuer shall forthwith appoint a Paying Agent having a specified office in New York
City in the circumstances described in Condition 6.5. Any variation, termination, appointment or
change shall only take effect (other than in the case of insolvency, when it shall be of immediate
effect) after not less than 30 nor more than 45 days’ prior notice thereof shall have been given to the
Noteholders in accordance with Condition 14.

In acting under the Agency Agreement, the Agents act solely as agents of the Issuer and do not assume
any obligation to, or relationship of agency or trust with, any Noteholders, Receiptholders or
Couponholders. The Agency Agreement contains provisions permitting any entity into which any
Agent is merged or converted or with which it is consolidated or to which it transfers all or
substantially all of its assets to become the successor paying agent.


                                                   54
13.   EXCHANGE OF TALONS

On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet
matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified
office of the Fiscal Agent or any other Paying Agent in exchange for a further Coupon sheet including
(if such further Coupon sheet does not include Coupons to (and including) the final date for the
payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the
provisions of Condition 9.

14.   NOTICES

All notices regarding the Bearer Notes will be deemed to be validly given if published in a leading
English language daily newspaper of general circulation in Asia, which is expected to be the Asian
Wall Street Journal. The Issuer shall also ensure that notices are duly published in a manner which
complies with the rules of any stock exchange or other relevant authority on which the Notes are for
the time being listed or by which they have been admitted to trading. Any such notice will be deemed
to have been given on the date of the first publication or, where required to be published in more than
one newspaper, on the date of the first publication in all required newspapers.

All notices to holders of Registered Notes will be deemed validly given if mailed to their registered
addresses appearing on the register. Any such notice shall be deemed to have been given on the third
day after the day on which it was mailed. In addition, for so long as any Notes are listed on a stock
exchange and the rules of that stock exchange so require, a copy of such notice will be published in
a daily newspaper of general circulation in the place or places required by those rules.

Until such time as any definitive Notes are issued, there may, so long as any Global Notes representing
the Notes are held in their entirety on behalf of Euroclear and/or Clearstream, Luxembourg, be
substituted for such publication in such newspaper(s) the delivery of the relevant notice to Euroclear
and/or Clearstream, Luxembourg for communication by them to the holders of the Notes and, in
addition, for so long as any Notes are listed on a stock exchange or are admitted to trading by another
relevant authority, and the rules of that stock exchange or relevant authority so require, such notice
will be published in a daily newspaper of general circulation in the place or places required by those
rules. Any such notice shall be deemed to have been given to the holders of the Notes on the day on
which the said notice was given to Euroclear and/or Clearstream, Luxembourg.

Notices to be given by any Noteholder shall be in writing and given by lodging the same, together (in
the case of any Note in definitive form) with the relative Note or Notes, with the Fiscal Agent (in the
case of Bearer Notes) or Registrar (in the case of Registered Notes). Whilst any of the Notes are
represented by a Global Note, such notice may be given by any holder of a Note to the Fiscal Agent
or the Registrar through Euroclear and/or Clearstream, Luxembourg, as the case may be, in such
manner as the Fiscal Agent and Euroclear and/or Clearstream, Luxembourg, as the case may be, may
approve for this purpose.

15.   MEETINGS OF NOTEHOLDERS AND MODIFICATION

15.1 Meetings of Noteholders and Modification

The Agency Agreement contains provisions for convening meetings of the Noteholders to consider any
matter affecting their interests, including the sanctioning by Extraordinary Resolution of a
modification of the Notes, the Receipts, the Coupons or any of the provisions of the Agency
Agreement. Such a meeting may be convened by the Issuer and shall be convened by the Issuer if
required in writing by Noteholders holding not less than five per cent. in nominal amount of the Notes
for the time being remaining outstanding. The quorum at any such meeting for passing an


                                                  55
Extraordinary Resolution is one or more persons holding or representing not less than 50 per cent. in
nominal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more
persons being or representing Noteholders whatever the nominal amount of the Notes so held or
represented, except that at any meeting the business of which includes the modification of certain
provisions of the Notes, the Receipts or the Coupons (including modifying the date of maturity of the
Notes or any date for payment of interest thereon, reducing or cancelling the amount of principal or
the rate of interest payable in respect of the Notes or altering the currency of payment of the Notes,
the Receipts or the Coupons), the quorum shall be one or more persons holding or representing not
less than two-thirds in nominal amount of the Notes for the time being outstanding, or, at any
adjourned such meeting, one or more persons holding or representing not less than one-third in
nominal amount of the Notes for the time being outstanding. An Extraordinary Resolution passed at
any meeting of the Noteholders shall be binding on all the Noteholders, whether or not they are present
at the meeting, and on all Receiptholders and Couponholders.

The Agent, the Registrar and the Issuer may agree, without the consent of the Noteholders,
Receiptholders or Couponholders, to:

(a)   any modification (except such modifications in respect of which an increased quorum is required
      as mentioned above) of the Notes, the Receipts, the Coupons or the Agency Agreement which is
      not prejudicial to the interests of the Noteholders; or

(b)   any modification of the Notes, the Receipts, the Coupons or the Agency Agreement which is of
      a formal, minor or technical nature or is made to correct a manifest or proven error or to comply
      with mandatory provisions of the law.

Any such modification shall be binding on the Noteholders, the Receiptholders and the Couponholders
and any such modification shall be notified to the Noteholders in accordance with Condition 14 as
soon as practicable thereafter.

15.2 Consolidation, Merger and Sale of Assets

The Issuer shall not consolidate with or merge into any other company or entity, and the Issuer may
not, directly or indirectly, sell, convey, transfer or lease all or substantially all of its properties and
assets to any company or other entity unless:

(a)   the company or other entity formed by or surviving such consolidation or merger or the person,
      company or other entity which acquires by conveyance or transfer, or which leases, all or
      substantially all of the properties and assets of the Issuer shall expressly assume by way of
      supplemental agency agreement the due and punctual payment of the principal of, and interest
      on, the Notes and the performance of the Notes, the Agency Agreement on the part of the Issuer
      to be performed or observed;

(b)   immediately after giving effect to such transaction, no Event of Default with respect to the Notes,
      and no event, which after notice or lapse of time, or both, would become an Event of Default with
      respect to the Notes, shall have happened and be continuing;

(c)   the Issuer has delivered to the Fiscal Agent (i) a certificate signed by two directors of the Issuer
      and (ii) an opinion of independent legal advisers of recognised standing stating that such
      consolidation, merger, conveyance, transfer or lease and any such supplemental agency
      agreement comply with this Condition 15.2 and that all conditions precedent relating to such
      transaction have been complied with; and


                                                    56
(d)   immediately after giving effect to such consolidation, amalgamation or merger of the Issuer, no
      internationally recognised rating agency has, in respect of the Notes, issued any notice
      downgrading its credit rating for such Notes or indicating that it intends to downgrade its credit
      rating for such Notes.

16.   FURTHER ISSUES

The Issuer shall be at liberty from time to time without the consent of the Noteholders, the
Receiptholders or the Couponholders to create and issue further notes having terms and conditions the
same as the Notes or the same in all respects save for the amount and date of the first payment of
interest thereon and so that the same shall be consolidated and form a single Series with the
outstanding Notes.

17.   CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

No person shall have any right to enforce any term or condition of this Note under the Contracts
(Rights of Third Parties) Act 1999, but this does not affect any right or remedy of any person which
exists or is available apart from that Act.

18.   GOVERNING LAW AND SUBMISSION TO JURISDICTION

18.1 Governing law

The Agency Agreement, the Deed of Covenant, the Notes, the Receipts, the Coupons, the Talons and
any non-contractual obligations arising out of or in connection with the Agency Agreement, the Deed
of Covenant, the Notes, the Receipts, the Coupons and the Talons are governed by, and shall be
construed in accordance with, English law.

18.2 Submission to jurisdiction

(a)   The Issuer irrevocably agrees, for the benefit of the Noteholders, the Receiptholders and the
      Couponholders, that the courts of England are to have exclusive jurisdiction to settle any
      disputes which may arise out of or in connection with the Notes, the Receipts and/or the Coupons
      (including a dispute relating to any non-contractual obligations arising out of or in connection
      with the Notes, the Receipts and/or the Coupons) and accordingly submits to the exclusive
      jurisdiction of the English courts.

(b)   The Issuer waives any objection to the courts of England on the grounds that they are an
      inconvenient or inappropriate forum. The Noteholders, the Receiptholders and the
      Couponholders may take any suit, action or proceedings (together referred to as Proceedings)
      arising out of or in connection with the Notes, the Receipts and the Coupons (including any
      Proceedings relating to any non-contractual obligations arising out of or in connection with the
      Notes, the Receipts and the Coupons) against the Issuer in any other court of competent
      jurisdiction and concurrent Proceedings in any number of jurisdictions.

18.3 Appointment of Process Agent

The Issuer appoints ICBC (London) Limited at its registered office at 2nd Floor Kings House, 36 King
Street, London EC2V 8BB as its agent for service of process, and undertakes that, in the event of ICBC
(London) Limited ceasing so to act or ceasing to be registered in England, it will appoint another
person as its agent for service of process in England in respect of any Proceedings. Nothing herein
shall affect the right to serve proceedings in any other manner permitted by law.


                                                   57
18.4 Waiver of immunity

The Issuer hereby irrevocably and unconditionally waives with respect to the Notes, the Receipts and
the Coupons any right to claim sovereign or other immunity from jurisdiction or execution and any
similar defence and irrevocably and unconditionally consents to the giving of any relief or the issue
of any process including, without limitation, the making, enforcement or execution against any
property whatsoever (irrespective of its use or intended use) of any order or judgment made or given
in connection with any Proceedings.




                                                 58
                                   SELECTED FINANCIAL INFORMATION

    The following tables set forth selected income statement and balance sheet information with respect
    to the Bank (on a consolidated basis) as of and for the years ended 31 December 2007, 2008 and
    2009 and the nine months ended 30 September 2009 and 30 September 2010, which have been
    extracted, without material adjustment, from the audited consolidated financial statements of the
    Bank in respect of the years ended 31 December 2007, 2008 and 2009 and unaudited unreviewed
    interim consolidated financial statements in respect of the nine months ended 30 September 2009
    and 30 September 2010, respectively.

    The Bank’s consolidated financial statements as of and for the years ended 31 December 2007,
    2008 and 2009, included in this Offering Circular, have been prepared in accordance with IFRS and
    audited by Ernst & Young, independent accountants, in accordance with, respectively, international
    standards on audit, as stated in their reports appearing herein.

    The unaudited consolidated financial statements for the nine months ended 30 September 2009 and
    30 September 2010 which are included in this Offering Circular have not been audited or subject
    to review by the auditors of the Bank. Investors should accordingly not place undue reliance on the
    unaudited consolidated interim financial statements for the nine months ended 30 September 2009
    and 30 September 2010.

    Investors should read the following summary of consolidated financial and other data relating to
    the Bank in conjunction with the financial statements and the related notes included elsewhere in
    this Offering Circular. See Index to the Financial Statements.

Consolidated Balance Sheet

                                                                  As at 30 September                             As at 31 December
                                                                    2010                  2009              2009             2008      2007
                                                              RMB          USD           RMB          RMB          USD       RMB       RMB
                                                                        (in millions)                              (in millions)

ASSETS
Cash and balances with central banks . . . . . .          . 2,266,208      344,838       1,777,512    1,693,048   257,623 1,693,024 1,142,346
Due from banks and other financial institutions.          .   304,421       46,322         256,218      235,301    35,805   168,363   199,758
Reserve repurchase agreements . . . . . . . . . .         .   366,015       55,695         564,082      408,826    62,209   163,493    75,880
Loans and advances to customers 1 . . . . . . . .         . 6,412,354      975,738       5,441,698    5,583,174 849,565.4 4,436,011 3,957,542
Financial Investments . . . . . . . . . . . . . . .       . 3,733,465      568,104       3,337,885    3,579,026   544,604 3,014,669 3,073,007
Investments in associates and jointly-controlled
   entities . . . . . . . . . . . . . . . . . . . . . .   .     38,880     5,916            35,670       36,278     5,520    28,421       172
Property and equipment . . . . . . . . . . . . . .        .     94,734    14,415            84,764       95,684    14,560    86,800    80,266
Deferred income tax assets . . . . . . . . . . . .        .     17,535     2,668            20,786       18,696     2,845    10,746     5,833
Other assets . . . . . . . . . . . . . . . . . . . . .    .    184,275    28,040           151,040      135,020    20,545   155,619   148,908
TOTAL ASSETS . . . . . . . . . . . . . . . . . .          . 13,417,887 2,041,737        11,669,655   11,785,053 1,793,276 9,757,146 8,683,712
LIABILITIES
Due to banks and other financial institutions . .         . 1,009,438    153,601           964,136    1,001,634   152,414   646,254   805,174
Repurchase agreements . . . . . . . . . . . . . .         .      2,999       456             6,046       36,060     5,487     4,648   193,508
Certificates of deposit and notes payable . . . .         .      8,406     1,279               965        1,472       224       726       562
Due to customers . . . . . . . . . . . . . . . . .        . 11,282,590 1,716,819         9,750,836    9,771,277 1,486,849 8,223,446 6,898,413
Income tax payable . . . . . . . . . . . . . . . . .      .     26,602     4,048            12,541       22,231     3,383    37,862    33,668
Deferred income tax liabilities . . . . . . . . . .       .        218        33               221          178        27        16       337
Other liabilities . . . . . . . . . . . . . . . . . . .   .    328,129    49,930           284,482      273,267    41,582   237,564   208,374
TOTAL LIABILITIES . . . . . . . . . . . . . .             . 12,658,382 1,926,167        11,019,227   11,106,119 1,689,966 9,150,516 8,140,036
EQUITY
Equity attributable to equity holders of the
   parent company
   Issued share capital . . . . . . . . . . . . . . .     .   334,019       50,826        334,019      334,019      50,826   334,019   334,019
   Reserves . . . . . . . . . . . . . . . . . . . . .     .   230,732       35,109        193,909      221,114      33,646   195,727   158,204
   Retained profits . . . . . . . . . . . . . . . . .     .   189,081       28,772        117,803      118,760      18,071    72,929    46,148
                                                              753,832      114,707        645,731      673,893     102,543   602,675   538,371
Non-controlling interests . . . . . . . . . . . . . .           5,673          863          4,697        5,041         767     3,955     5,305
TOTAL EQUITY . . . . . . . . . . . . . . . . . .              759,505      115,570        650,428      678,934     103,310   606,630   543,676
TOTAL EQUITY AND LIABILITIES . . . . . . 13,417,887 2,041,737                           11,669,655   11,785,053 1,793,276 9,757,146 8,683,712



1
    Net of loan loss allowance.



                                                                           59
Consolidated Income Statement

                                                          For the nine m onths ended 30
                                                                      September                     For the year ended 31 December

                                                                2010                 2009               2009              2008        2007

                                                          RMB           USD          RMB          RMB          USD        RMB         RMB
                                                                     (in millions)                             (in millions)
Interest income . . . . . . . . . . . . . . . . . . . .   338,818        51,556      300,819      405,878      61,761     440,574     357,287
Interest expense . . . . . . . . . . . . . . . . . . .    (117,155)     (17,827)     (122,570)    (160,057)    (24,355) (177,537) (132,822)
NET INTEREST INCOME. . . . . . . . . . . . .              221,663        33,729      178,249      245,821      37,405     263,037     224,465
Fee and commission income. . . . . . . . . . . . .         58,029         8,830       43,642       59,042       8,984      46,711      40,015
Fee and commission expense . . . . . . . . . . . .          (3,466)          (527)     (2,581)      (3,895)       593      (2,709)     (1,656)
NET FEE AND COMMISSION INCOME . . . .                      54,563         8,303       41,061       55,147       8,391      44,002      38,359
Other operating income/(expense), net . . . . . . .          2,048           312            275      1,308        199       2,339      (5,831)
OPERATING INCOME. . . . . . . . . . . . . . .             277,685        42,254      226,127      309,411      47,082     310,195     257,428
Operating expenses . . . . . . . . . . . . . . . . . .     (95,418)     (14,519)      (83,747)    (120,819)    (18,384) (111,335) (104,660)
Impairment losses on:
   Loans and advances to customers . . . . . . . .         (17,986)       2,737       (13,653)     (21,682)     (3,299)   (36,512)    (33,061)
   Others . . . . . . . . . . . . . . . . . . . . . . .       166             25       (1,130)      (1,603)      (244)    (18,950)     (4,345)
OPERATING PROFIT . . . . . . . . . . . . . . .            164,447        25,023      127,597      165,307      25,154     143,398     115,362
Share of profits and losses of associates and
   jointly-controlled entities. . . . . . . . . . . . .      1,877           286        1,387        1,987        302       1,978            16
PROFIT BEFORE TAX . . . . . . . . . . . . . .             166,324        25,309      128,984      167,294      25,456     145,376     115,378
Income tax expense . . . . . . . . . . . . . . . . .       (38,529)      (5,863)      (28,440)     (37,898)     (5,767)   (34,150)    (33,124)
PROFIT FOR THE PERIOD . . . . . . . . . . .               127,795        19,446      100,544      129,396      19,690     111,226      82,254
Attributable to:
   Equity holders of the parent company . . . . .         127,216        19,358      100,019      128,645      19,575     110,841      81,520
   Non-controlling interests . . . . . . . . . . . . .        579             88            525       751         114          385       734
EARNINGS PER SHARE ATTRIBUTABLE
   TO ORDINARY EQUITY HOLDERS OF
   THE PARENT COMPANY
Basic and diluted (RMB yuan) . . . . . . . . . . .            0.38           0.06        0.30         0.39        0.06         0.33      0.24




                                                                        60
                                    USE OF PROCEEDS

The net proceeds from each issue of Notes (after deducting underwriting fees and commissions and
other expenses incurred by the Bank in connection with such issue) will be applied by the Singapore
branch of the Bank to finance its operations and for its general corporate purposes.




                                                61
                            INVESTMENT CONSIDERATIONS

 The Bank believes, having made all reasonable enquiries, that the following factors may affect its
 ability to fulfil its obligations under Notes issued under the Programme. Most of these factors are
 contingencies which may or may not occur and the Bank is not in a position to express a view on
 the likelihood of any such contingency occurring.

 Prospective investors should pay particular attention to the fact that the Group and its activities
 are governed by the legal, regulatory and business environment in the jurisdictions where it carries
 out its business and which may in some respects differ from that which prevails in other countries.
 Prospective investors should also note that certain statements set out below constitute
 “forward-looking statements” as discussed above.

 The following describes some of the significant investment considerations that could affect the
 Group, the Programme and the value of the Notes. In addition, some risks may be unknown to the
 Bank and other risks, currently believed to be immaterial, could turn out to be material. All of these
 could have a material adverse effect on the Group’s business, cash flows, financial condition,
 results of operations and prospects.

 The Bank believes that the factors described below represent the principal risks inherent in
 investing in Notes issued under the Programme, but its inability to pay interest, principal or other
 amounts on or in connection with any Notes may occur for other reasons which may not be
 considered significant risks by it based on information currently available to it or which it may not
 currently be able to anticipate. Prospective investors should also read the detailed information set
 out elsewhere in this Offering Circular and reach their own views prior to making any investment
 decision.


RISKS RELATING TO THE BANK’S BUSINESS

The Bank may face risks arising from deterioration in the quality of its loans.

Risk arising from the loan business is one of the key risks of the Bank’s business. The risk of
non-payment by its customers is affected by the credit profile of particular borrowers, the tenor of
loans and changes in economic and industry conditions, such as occurred during the Asian financial
crisis and the recent global recession. The amount and ratio of non-performing loans (NPLs) have
decreased on a yearly basis. As at 30 September 2010, 30 June 2010, 31 December 2009, 31 December
2008 and 31 December 2007, the Bank’s NPLs amounted to RMB75,731 million (US$11,524) million,
RMB80,073 million (US$12,184) million, RMB88,467 million (US$13,462) million, RMB104,482
million (US$15,899) million and RMB111,774 million (US$17,008) million, representing NPL ratios
of 1.15 per cent., 1.26 per cent., 1.54 per cent., 2.29 per cent. and 2.74 per cent. respectively.

However, if the economic growth of the PRC slows down in the future or any other factor occurs which
adversely affects the economic growth of the PRC, the ability of the Bank’s borrowers to repay their
outstanding debt may be adversely affected.

Actual losses on the Bank’s loans may exceed its allowance for impairment losses.

As at 30 September 2010, 30 June 2010, 31 December 2009, 31 December 2008 and 31 December
2007, the coverage ratio for provisions for NPLs reached 210.16 per cent., 189.81 per cent., 164.41
per cent., 130.15 per cent. and 103.50 per cent., respectively, representing an upward trend on an
annual basis.


                                                  62
The amount of the Bank’s allowance for impairment losses on loans is determined based on its
assessment of factors which may affect the quality of its loans. These factors include the borrower’s
financial condition, the repayment capability and repayment willingness, the current realisable value
of any collateral and ability to obtain future support from guarantors by the borrower, as well as the
PRC’s economy, the PRC government’s macroeconomic policies, interest rates, exchange rates, and
the legal and regulatory environment. Most of these factors are beyond the Bank’s control. Should the
Bank’s assessment or forecast of the impact of these factors on the quality of its loans be different
from actual developments, if its assessment system proves to be inaccurate or its skill in applying the
assessment systems or its ability to collect relevant statistical data proves to be insufficient, or actual
loan quality deteriorates more than what has been expected, then the allowance for impairment losses
on loans provided by the Bank may not be sufficient to cover actual losses, and the Bank may need
to make additional provision in the future which could lead to a decrease in profit and could adversely
affect its results of operations and financial condition.

The Bank is subject to risks relating to collateralised or guaranteed loans

A significant percentage of the Bank’s loans are secured by collateral or guarantees. As at 30 June
2010, its total amount of loans to customers reached RMB6,354,384 million (US$966,917 million),
respectively, with unsecured loans of RMB2,071,668 million (US$315,326 million), guaranteed loans
of RMB1,011,604 million (US$153,931 million), pledged loans of RMB704,019 million (US$107,127
million), and loans secured by mortgages of RMB2,567,093 million (US$390,623 million).

The collateral securing the Bank’s loans primarily consists of assets that are located in the PRC, the
value of which may significantly fluctuate or decline due to factors beyond its control, including
macroeconomic factors affecting the PRC. Any decline in the value of collateral securing the Bank’s
loans may decrease the amounts it can recover on the underlying loans.

In addition, a portion of the Bank’s loans are secured by guarantees provided by affiliates of the
borrowers or third parties. The Bank’s exposure to guarantors is generally unsecured. Simultaneous
deterioration in the financial condition of the borrowers and guarantors may cause the Bank to become
unable to recover part or all of the loans. Moreover, guarantees may be deemed invalid by a court if
a guarantor fails to satisfy certain requirements under PRC laws. For instance, under the PRC
Guaranty Law, operational departments and branches without appropriate authorisation from an
enterprise legal person cannot act as guarantors. For the foregoing reasons, the Bank is exposed to the
risk that it may not be able to recover amounts payable under the guarantees.

In addition, the Bank has a relatively large portion of loans secured by collateral or pledge including
property and land. Changes in macroeconomic conditions and legal environment or other adverse
factors may cause significant declines or fluctuations in the value of the Bank’s loan collateral,
making it difficult to realise the value of collateral, and hence increasing its loan impairment loss. If
the above situations occur, the Bank’s financial condition and results of operations may be adversely
affected.

The Bank is subject to risks related to concentration of loans to certain industries.

As at 30 June 2010, the Bank’s domestic loans were relatively concentrated in the following
industries: (i) transportation, storage and postal services; (ii) manufacturing; (iii) water, environment
and public utility management; (iv) production and supply of electricity, gas and water; and (v) real
estate representing 14.12 per cent., 13.35 per cent., 8.73 per cent., 8.63 per cent. and 7.92 per cent.,
respectively, of its total loans to customers. For details of the Bank’s distribution of corporate loans
by industry, please refer to the section headed “Description of the Bank’s Assets and Liabilities”.


                                                    63
During the six months ended 30 June 2010, the Bank has timely adjusted the allocation of its loans
among different industries according to changes in macroeconomic trends and has taken steps to
develop its credit portfolio for different industries. However, a significant downturn in an industry in
which the Bank’s loans are highly concentrated may lead to a significant increase in its NPLs in such
industry, which may materially and adversely affect its results of operations and financial condition.

The Bank is subject to risks associated with real estate-related loans.

The Bank’s real estate-related loans in the PRC include corporate property loans and personal housing
loans. As at 30 June 2010, in terms of the distribution of the Bank’s corporate loans by product line,
property loans amounted to RMB531,919 million (US$80,940 million), accounting for 8.4 per cent.
of its total loans. Non-performing corporate property loans amounted to RMB4,274 million (US$650
million) with a NPL ratio of 0.80 per cent.. The Bank’s personal housing loans amounted to
RMB1,037,764 million (US$157,912 million), accounting for 16.3 per cent. of its total loans.
Non-performing personal housing loans amounted to RMB4,559 million (US$694 million) with a NPL
ratio of 0.44 per cent..

In recent years, the Bank has actively responded to changes in the real estate market by taking steps
to optimise its real estate-related loans product mix and improved its credit policy towards the real
estate industry, which has resulted in an improvement in the quality of its real estate-related loans. The
Bank has been closely monitoring the risks associated with the real estate market, established a name
list control system of real estate developers and focused its loans on high quality common commercial
housing projects, introduced a project risk monitoring and precaution system, paid close attention to
any adjustment in real estate macro policies and real estate market trends and timely adjusted its credit
policies for the real estate industry accordingly. At the same time, the Bank has also adopted a series
of measures to strengthen the risk management of personal housing loans, and refined the post-lending
management of personal loans. For details related to the Bank’s loans to the real estate industry, please
refer to “Description of the Bank’s Assets and Liabilities.

In 2010, pursuant to the relevant requirements of the China Banking Regulatory Commission (the
CBRC), the Bank has performed stress tests on the impact on loan quality based on fluctuations in the
real estate market, which specifically analysed the sensitivity of the asset quality of real estate-related
loans of the Bank with reference to movements in the real estate market. Based on the results of the
stress tests and having considered the different scenarios being tested, the Bank’s risks associated with
real estate-related loans are within controllable limits.

However, notwithstanding the above, any long-term and extreme adjustment of the real estate market
due to changes in macroeconomic conditions, government policies or other factors may adversely
affect the quality and future growth rate of the Bank’s real estate-related loans, which may adversely
affect its financial condition and results of operation.

The Bank is subject to risks related to loans to industries facing over-capacity.

On 22 December 2009, PBOC, the CBRC, the China Insurance Regulatory Commission (the CIRC)
and the China Securities Regulatory Commission (the CSRC) jointly promulgated the “Guiding
Opinion to Further Improve Financial Service to Support the Restructure and Revitalisation of Key
Industries and Curb Over-Capacity in Certain Industries”, which requires commercial banks to
actively support the government policy on consolidation of industries and financial market control,
and prohibits commercial banks from making loans to entities or projects related to industries with
serious over-capacity as identified by the government, including industries related to iron and steel,
cement, plate glass, coal chemistry, poly-crystalline silicon and wind power equipment.


                                                    64
The Bank has focused on the potential risks it is exposed to in relation to industries facing
over-capacity. The Bank strictly controls its loans to industries facing over-capacity by adopting the
necessary industry credit policy and systematic credit approval process. The Bank has also
implemented a strict industry quota mechanism and a client list control system for industries facing
over-capacity. The Bank will consider financing new projects in industries facing over-capacity only
if the projects are in accordance with the State’s industrial policy guidelines, have obtained
appropriate approvals or verification (filing) from competent administrative departments in charge of
investment, and have met the requirements of “Green Credit” policy. In addition, such loans are
required to be reported to the Bank’s headquarters for approval. At the same time, the Bank has
adopted a flexible principle on industry credit and reinforced its efforts to optimise its loan structure.
The Bank has controlled its risk of lending to industries facing over-capacity by strictly implementing
industry credit policy. However, if over-capacity in the above industries continues and does not shrink,
the government may reinforce its control over macroeconomic policies, which will adversely affect the
operating environment and repayment ability of certain of the Bank’s borrowers. In such a case, the
Bank’s financial condition and results of operations may be adversely affected.

The Bank is subject to risks related to loans to local government financing platforms.

The Bank’s loans to local government financing platforms are mainly made to the investment and
financing platforms of various development zones, state-owned asset management companies, land
reserve companies and urban construction investment companies, covering a number of industries
including water, environment and public utility management, transportation, storage, postal services
and leasing and commercial services. Most of these loans were made to financing platforms of
provincial and municipal level or above with terms of less than five years. The asset quality of these
loans is good and the NPL ratio is low.

The Bank has implemented measures to control the risks associated with loans to local government
financing platforms, the aggregate volume of loans and their investment direction in order to ensure
its loans are primarily disbursed to key construction and development areas of the state and projects
with high quality. In addition, the Bank has adopted several risk mitigation measures to ensure the
security of its loans to local government financing platforms. However, it cannot rule out the
possibility that, as a result of changes of macroeconomic conditions, government economic policy and
project construction management, the debt repayments of these financing platforms may be adversely
affected. The Bank’s financial condition and results of operations may in turn be affected.

The Bank is subject to risks related to its concentrated exposure to certain customers.

As at 30 June 2010, 31 December 2009, 31 December 2008 and 31 December 2007, the total amount
of loans granted to the single largest customer accounted for 3.0 per cent., 2.8 per cent., 2.9 per cent.
and 3.1 per cent., respectively, of the Bank’s net capital while the total amount of loans granted to the
top 10 single customers accounted for 22.8 per cent., 20.9 per cent., 20.4 per cent. and 21.1 per cent.,
respectively, of its net capital. The Bank’s borrower concentration ratios comply with regulatory
requirements and are maintained at a relatively low level. However, deterioration in the financial
condition of its key borrowers may diminish their ability to repay loans, which can potentially have
a material adverse effect on the Bank’s financial condition and results of operations.

The Bank’s loan classification and provisioning policies are not fully comparable to those of banks
in certain other countries or regions.

The Bank classifies its loans using a five-tier classification system in accordance with the guidelines
set forth by the PRC regulators. The five tiers are pass, special mention, sub-standard, doubtful and
loss. The Bank assesses its impairment losses on loans and determines a level of allowance for


                                                   65
impairment losses using the five-tier classification system. The Bank performs such assessment,
determination and recognition using the concept of impairment under IAS 39. The Bank’s loan
classification and provisioning policies may be different in certain respects from those of banks
incorporated in certain other countries or regions. As a result, its loan classification as well as its
allowance for impairment losses, as determined under its loan classification and provisioning policies,
may differ from those that would be reported by banks incorporated in other countries or regions. As
such, the Bank’s loan classification and allowance for impairment losses is not fully comparable to
amounts reported by such banks.

Proposal to replace IAS 39 may require the Bank to change its provisioning practice.

The Bank currently assesses its loans and investment assets for impairment under IAS 39. The
International Accounting Standards Board issued an exposure draft in November 2009 on amortised
cost and impairment which is part of a comprehensive project to replace IAS 39 in its entirety. If it
is adopted, it will result in the replacement of the incurred loss model under IAS 39 with an expected
loss model. The above change in accounting policies may require the Bank to change its current
provisioning practice and may, as a result, materially affect its financial condition and results of
operations.

The Bank is subject to liquidity risk.

Customer deposits have been the Bank’s main source of funding. As at 30 June 2010, 95.1 per cent.
of the Bank’s total customer deposits were time deposits with remaining maturities of one year or less
and demand deposits.

There is a mismatch between the maturities of the Bank’s funding sources and the maturities of its
assets. In its experience, in part due to the lack of alternative investment products in the PRC, the
Bank’s short-term customer deposits have generally not been withdrawn upon maturity and have thus
represented a stable source of funding. However, the Bank cannot assure you that this will continue
to be the case. If a substantial portion of its depositors withdraw their demand deposits or do not roll
over their time deposits upon maturity, it may need to pay higher costs to seek alternative sources of
funding to meet its funding requirements, and it cannot assure you that it will be able to obtain
additional funding on commercially reasonable terms as and when required. In response to this, the
Bank has closely monitored changes in monetary policy, market environment and maintained
reasonable liquidity reserve to handle position movements caused by various factors. Whilst ensuring
risk control, the Bank has proactively expanded channels of funding, enhanced management in fund
allocation and maturity mismatch.

However, the Bank’s ability to obtain additional sources of funding may be affected by factors over
which it has little or no control, such as deterioration of market conditions and disruptions to financial
markets. If the Bank fails to secure required funding on a timely basis, it may face liquidity risk which
may adversely affect its financial condition and results of operations.

The Bank cannot assure you that its risk management and internal control policies and procedures
can effectively control or protect it against all credit and other risks.

The Bank has in the past suffered from certain credit-quality problems, lapses in credit approval and
control processes, internal control deficiencies and operational problems as a result of weaknesses in
its risk management and internal controls. The Bank has been proactively improving its
comprehensive risk management and internal control capabilities. Notwithstanding this, the Bank
cannot assure you that its risk management and internal control policies and procedures will
adequately control, or protect it against, all credit and other risks. The Bank’s risk management and
internal control capabilities are limited by the information and risk management tools or technologies


                                                   66
available to it. The Bank’s ability to implement and maintain strict internal control may be affected
by its expansion in business scale and business scope. The Bank cannot assure you that all of its
employees can always comply with its internal control policy and procedures. Moreover, the Bank’s
growth and expansion may affect its ability to implement and maintain stringent internal controls. If
there are any deficiencies in the Bank’s risk management and internal control policies and procedures,
it may be subject to credit risk, liquidity risk, market risk, operational risk or reputational risk, which
may adversely affect its results of operations and financial condition.

The Bank is subject to risks related to its expanding global network.

In recent years, the Bank has seized opportunities arising from the global financial markets to
accelerate the expansion of its global network through a balanced development in both emerging and
mature markets and through the establishment of overseas branches and strategic mergers and
acquisitions. With the aim of building a large multi-functional global financial services group, the
Bank has actively and prudently promoted the implementation of an internationalised operational
strategy. As at 30 June 2010, the Bank had set up 24 tier-1 operational branches in 22 countries and
regions such as Hong Kong, Macau, Korea, Japan, Vietnam, Singapore, Indonesia, Malaysia, Thailand,
United Arab Emirates, Qatar, Kazakhstan, United Kingdom, Germany, Luxembourg, Russia, Australia,
United States and Canada. In addition, in January 2011, the Bank also set up branches in France,
Spain, Italy, Belgium and the Netherlands.

In promoting the implementation of its internationalisation strategy, the Bank’s operations may be
affected by a number of factors, including overseas market conditions, the operations of its overseas
borrowers and their ability to service their debt, and integration of overseas assets acquired by it. The
Bank’s results of operations and financial condition may be adversely affected if there are adverse
changes in the above factors.

In addition, the Bank’s rapid international expansion exposes it to a new variety of regulatory and
business challenges and risks, including cross-cultural risk , currency risks, interest rate risks,
compliance risk, regulatory and reputational risk and operational risk. The loan portfolio of the Bank’s
international branches and subsidiaries exposes the Bank to borrowers’ credit risk, regional market
risk and legal risk in overseas markets.

The Bank is subject to new risks related to the continuous expansion of its products, services and
business scope.

In recent years, the Bank has actively developed a number of new products and expanded its service
scope, including investment banking, asset management, fund management and financial leasing, etc.
While expanding its products, services and business scope, the Bank is exposed to a number of risks.
For example, its limited experience may not enable it to successfully develop its new business; its
anticipated market demand for new products or services may not materialise; it may not successfully
hire or retain personnel who have the relevant skills and experience; its competitors may have
substantially greater experience and resources for the new and expanded business activities or may
imitate its new products and services; it will need to enhance its risk management and information
technology systems to support a broader range of activities, which requires time and additional
funding and other resources; and regulators may revoke or withhold their approval for any products
and services that it has offered or has planned to offer.

As a result, the return on the Bank’s new products, services or businesses may be less, or realised later
than expected, which may adversely affect its financial condition and results of operations.


                                                    67
The Bank is subject to risk related to its credit commitments and guarantees.

The Bank’s credit commitments and financial guarantees primarily consist of bank acceptance, loan
commitments, guarantees and letters of credit. As at 30 June 2010, 31 December 2009, 31 December
2008 and 31 December 2007, the Bank’s credit risk weighted amounts of credit commitments were
RMB582,978 million (US$88,709 million), RMB507,149 million (US$77,170 million), RMB385,049
million (US$58,591 million) and RMB384,545 million (US$58,514 million). The Bank is exposed to
credit risk related to the above-mentioned credit commitments and guarantees. If its customers cannot
perform their obligations, the Bank will need to fulfil the related commitments and guarantees. In
addition, if the Bank cannot obtain compensation from relevant customers, its results of operations and
financial condition may be affected.


The Bank is subject to operational risks and risks relating to its information technology systems.

The Bank is subject to operational risks such as internal fraud, external fraud, customers, products and
business activities, execution, closing and process management, employment system and workplace
safety, damage to physical assets and IT systems events.

The Bank has established a series of policies and procedures to identify, assess, monitor, manage and
report operational risks according to the “Guidance to the Operational Risk Management of
Commercial Banks” issued by the CBRC. Notwithstanding that the Bank has adopted these measures,
operational risks may cause losses to it if these measures are not put in place thoroughly or cannot
cover all aspects of its operations.

The Bank depends on its information technology systems to accurately process a large number of
transactions on a timely basis, to store and process most of its data regarding its business and
operations. The Bank has adopted a large number of technical measures and management initiatives
to ensure the secure and reliable operation of its information systems. The Bank has also proactively
developed information security protection initiatives and improved its emergency response and
disaster recovery systems. However, the Bank’s business would be adversely affected if part or all of
its information system malfunctions due to any defect in software and hardware of its information
system or any deficiency in its information security protection. Meanwhile, if the Bank fails to
effectively improve or upgrade its information technology systems on a timely basis, its
competitiveness, results of operations and financial condition could be adversely affected.

The Bank may not be able to fully prevent or timely detect any money laundering and other illegal
or improper activities.

The Bank is required to comply with applicable anti-money laundering and anti-terrorism laws and
other regulations in the PRC, Hong Kong, Singapore and other jurisdictions where it has operations.
These laws and regulations require it, among other things, to adopt and enforce “know-your-customer”
policies and procedures and to report suspicious and large transactions to the applicable regulatory
authorities in different jurisdictions. The Bank has strictly complied with applicable anti-money
laundering laws and other relevant regulations. The Bank has taken steps to improve its anti-money
laundering work mechanism, actively fulfilled applicable anti-money laundering regulatory
requirements and comprehensively improved the management standard of its anti-money laundering
compliance. During the six months ended 30 June 2010, the Bank was not aware of any money
laundering or other major illegal or improper activities engaged by or involving any employee of its
domestic or overseas branches.


                                                  68
However, the Bank cannot assure you that it can completely eradicate money laundering activities or
other improper activities carried out by organisations or individuals through it. If it fails to timely
detect and prevent money laundering activities or other illegal or improper activities, relevant
regulatory agencies will have the power and authority to impose fines and other sanctions on it, which
may adversely affect its reputation, financial condition and results of operations.

The Bank may not be able to detect and prevent all fraud or other misconduct committed by its
employees or third parties.

The Bank has continued to strengthen the detection and prevention of fraud or other misconduct
committed by its employees or third parties. However, the Bank cannot assure you that its internal
control policies and procedures could completely and effectively prevent all fraud or other misconduct
committed by its employees or third parties. Such incidents can be difficult to fully detect and deter
and may adversely affect banks and financial institutions more significantly than companies in other
industries due to the large amounts of cash that flow through their systems. This fraud or misconduct
targeted at the Bank may adversely affect its business, results of operations and financial condition.
Detected incidents of past fraud and other misconduct by third parties against the Bank include, among
other things, misrepresentation, forgery, theft, robbery and certain armed crimes.

By way of examples, in October 2010, Derick Chan Po-fui, head of commercial banking, and Chan
Yick-yiu, former head of real estate and finance, at the Bank’s Hong Kong-listed subsidiary, Industrial
and Commercial Bank of China (Asia) Limited, were charged by the Independent Commission Against
Corruption with accepting bribes worth HK$3.3 million (US$0.42 million) and HK$2.5 million
(US$0.32 million), respectively, from a customer for extending due dates on loans.

Further, the Bank’s branches and subsidiaries have historically had significant autonomy in their
operation and management, and the Bank’s head office may not be able to ensure that various policies
are implemented effectively and consistently across the organisation. If the Bank is unable to
effectively manage and supervise its branches and subsidiaries, it may not be able to timely detect or
prevent fraud or other misconduct of its employees or third parties, which may result in damage to its
reputation and an adverse effect on its business, financial condition, results of operations and
prospects.

The Bank is subject to risks related to property title certificates or other licences and certificates.

As at 30 June 2010, the Bank owned 24,751 properties in the PRC. For 804 of such properties, it had
not obtained both building ownership certificates and state-owned land use right certificates. For 425
properties, it had not obtained building ownership certificates. In addition, for 663 properties, it had
not obtained state-owned land use right certificates. The Bank also had 4,699 leased properties within
the PRC, for which the lessors have not provided it with the relevant title certificates of the property
and/or consent letter from the relevant property owners to sublease. In respect of 1,986 leased
properties, the Bank has been provided with written undertakings indicating that the lessors will
compensate its potential loss due to defects in relevant property title certificates or the relevant lease
agreements contain such undertakings. If the Bank has to relocate its branches or sub-branches due to
the title defects with regard to properties owned or leased by it, it will incur additional costs relating
to such relocation.

In addition, a small number of the Bank’s branches are currently in the process of applying for a new
financial licence, business licence and/or bancassurance licence, due to a licence renewal, upgrade of
branch offices, change of name, relocation or change of business nature. The Bank will work closely
with the local regulatory authorities to ensure that it can obtain the above-mentioned licences as soon
as possible.


                                                   69
The Bank is exposed to certain risks in relation to the bonds issued by Huarong.

During the period from 1999 to 2001, the Bank disposed of non-performing assets with a book value
of RMB407.7 billion (US$62.0 billion) to Huarong, and received 10-year non-transferrable bonds
issued by Huarong with a nominal value of RMB313.0 billion (US$47.6 billion) as well as RMB94.7
billion (US$14.4 billion) in cash as consideration. The above bonds issued by Huarong have a fixed
interest rate of 2.25 per cent. per annum. Huarong has paid interest on the bonds to the Bank in a
timely manner in the past pursuant to the terms of the Huarong bonds. In addition, the Ministry of
Finance of the People’s Republic of China (the MOF) issued a notice on 14 June 2005 to the effect
that: (1) with effect from 1 July 2005, in the event of any failure of Huarong to pay for the interest
on the bonds in full to the Bank, MOF will provide financial support; and (2) if necessary, MOF will
provide support for the payment of the principal of the bonds issued by Huarong.

During the period from 2010 to 2011, the 10-year bonds issued by Huarong with a nominal value of
RMB313.0 billion (US$47.6 billion) as mentioned above and held by the Bank will mature. In
accordance with the “Letter from MOF in Respect of the Bonds Issued by China Huarong Asset
Management Corporation held by Industrial and Commercial Bank of China” (Cai Jin Han [2010] No.
105), MOF agreed that the term of the Huarong bonds held by the Bank will be extended by 10 years
after the expiry, and the terms of the bonds such as the interest rate will remain unchanged, and that
MOF will continue its support for the principal and interest payment in relation to the Huarong bonds
held by the Bank. Pursuant to the Bank’s internal guidelines, it has executed strict internal approval
and relevant information disclosure procedures in connection with the extension of the bonds issued
by Huarong.

Huarong is a wholly state-owned non-bank financial institution which has been approved by the State
Council, and was duly established in October 1999 with a registered capital of RMB10.0 billion
(US$1.5 billion). In the past 10 years, Huarong has actively and prudently carried out a commercial
transformation, and has developed a comprehensive financial service system with asset management
as its main business and securities, leasing, trust and investment as its supplementary businesses. In
addition, pursuant to the above notice from MOF, MOF will provide financial support for the
repayment of principal and interest of the Huarong bonds held by the Bank if necessary. Given MOF’s
sovereign credit rating, the recoverability of the bonds issued by Huarong can be reasonably
guaranteed.

In consideration of the various investment channels and market returns currently available in the
market, there is a certain level of opportunity costs borne by holding the bonds issued by Huarong.
However, given the large investment size and long investment term of the bonds, if the principal of
the Huarong bonds is returned upon maturity and if the above capital were to be reallocated, it will
still be difficult to allocate all the capital to long-term loans, but will only be able to allocate to
non-credit assets, with the investment returns limited by the size of RMB bond market. Therefore, the
above opportunity cost will have a relatively small impact on the Bank’s operations.

The transaction for the Bank to purchase the bonds issued by Huarong is part of the financial
arrangements set by state policies. The Bank has enhanced its asset quality through relevant
transactions to purchase the Huarong bonds, which will be conducive to consistent improvement of its
profitability and shareholders’ equity. Continuing to hold such bonds will not have an impact on the
Bank’s profitability. After the extension of the bonds issued by Huarong, MOF will still continue to
provide support on the repayment of the principal and interests of the Huarong bonds held by the
Bank, and therefore will not cause any material adverse impact on the interests of its shareholders.

The Huarong bonds are financial bonds which are placed to the Bank with the approval of PBOC and
are specifically issued for the acquisition of the Bank’s non-performing assets. There are no similar


                                                  70
bonds in the open bond market and no active market for such bonds. In accordance with the accounting
standards, the Bank classifies the Huarong bonds, without an available valuation on the active market
and with fixed repayment amounts, as receivables relating to bonds investment and are subsequently
measured at amortised cost using the effective interest method. Given that the interest on each
payment term of the Huarong bonds has been paid in full and in a timely manner, and that MOF has
provided its support for the principal and interest payment in relation to the Huarong bonds, there is
no event of impairment of financial assets under the accounting standards. As such, the Bank is of the
view that the accounting treatment in relation to the Huarong bonds meets the requirements under the
accounting standards. The bonds are measured at fair value, there is no indication of impairment and
thus no provisions for impairment losses are needed.

The Bank’s auditors, Ernst & Young, after conducting a review, are of the view that the determination
and initial recognition of the fair value of the Huarong bonds following the extension meet the
relevant requirements under the accounting standards, and there is no need for making provisions for
impairment losses in relation to the extension arrangement.

The Bank’s legal counsel as to PRC law, King & Wood, after conducting a review, is of the view that
the holding of the Huarong bonds by the Bank has minor effects on the Bank’s business operations.
The recoverability of the Huarong bonds held by the Bank can be reasonably guaranteed, the Bank has
carried out related internal decision-making procedures regarding the extension of the term of the
Huarong bonds, and such matters will not have any material adverse effect on the interests of the
Bank’s shareholders.

The Bank expects that MOF will perform its obligations as set out in the notices when necessary.
However, due to the absence of any precedent for requesting the fulfilment of, or otherwise resorting
to other legal procedures to seek the enforcement of, similar undertakings of MOF or other
government authorities, the Bank cannot guarantee any enforcement of such notices by operation of
law. In the event of any failure of Huarong to discharge any of its payment obligations relating to such
bonds and that the enforcement of such notices by operation of law cannot be guaranteed, the Bank’s
operating results and financial conditions will be materially and adversely affected.

The Bank holds bonds issued by Huijin.

As at 30 June 2010, Central Huijin Investment Limited (Huijin) held approximately 35.42 per cent.
of the Shares of the Bank. In August and September 2010, Huijin issued the Central Huijin Investment
Ltd. bonds (hereinafter referred to as Huijin Bonds) in the national interbank bond market.

MOF has issued the “Letter on the Issues of the Issuance of Renminbi Bonds in an Amount of
RMB187.5 billion (US$28.5 billion) by Central Huijin Investment Ltd.” (Cai Ban Jin [2010] No. 60)
to Huijin, pursuant to which MOF confirmed that the issuance of the RMB187.5 billion (US$28.5)
Renminbi bonds by Huijin was made based on the decision of the State Council for the purpose of
making a capital contribution to The Export-Import Bank of China and China Export & Credit
Insurance Corporation and participating in the fundraising activities of ICBC, Bank of China Limited
and China Construction Bank Corporation on behalf of the state.

The CBRC has issued the “Letter of Approval from the CBRC on Matters in respect of the Issuance
of Renminbi Bonds by Central Huijin Investment Ltd.” (Yin Jian Han [2010] No. 285), pursuant to
which the CBRC confirmed its treatment of Huijin Bonds as policy financial bonds, and the risk
weight associated with the investment in such bonds by commercial banks is zero. Huijin, on behalf


                                                  71
of the state, will use the proceeds raised from such issuance for the purpose of making a capital
contribution to The Export-Import Bank of China and China Export & Credit Insurance Corporation
and supplementing the capital of ICBC, Bank of China Limited and China Construction Bank
Corporation.

The Bank has subscribed for the Huijin Bonds by way of tender in the open market. As at 22 November
2010, the Bank holds a small amount of Huijin Bonds. As verified by King & Wood, the Bank’s legal
counsel as to PRC law, the Bank’s holding of Huijin Bonds does not contravene with its Articles and
shall not have a material adverse impact on the interests of the other shareholders.

The Bank is subject to counterparty risks in its derivative transactions.

The Bank acts primarily as an intermediary in domestic and international foreign exchange and
derivative markets, and it currently has foreign currency forward and swap contracts with a number
of domestic and international banks, financial institutions and other entities. The Bank also has
interest rate swap contracts and fair value hedges, but is subject to credit risk from its various
counterparties. As at 30 June 2010, the notional amount of the Bank’s outstanding derivative financial
instruments amounted to RMB1,011,997 million, and the fair values of its outstanding derivative
assets and liabilities amounted to RMB8,735 million and RMB10,248 million, respectively. Although
the Bank believes that the overall credit quality of its counterparties is adequate, it cannot assure that
parties with significant risk exposure will not have difficulty in fulfilling derivative contracts that may
create losses to the Bank.

The Bank may be subject to OFAC penalties if it were determined to have violated any OFAC
regulations.

The United States is currently imposing economic sanctions towards certain countries, which are
administered by the Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department and
which apply only to U.S. entities and, in certain cases, to foreign affiliates of U.S. entities, or to
transactions involving certain aspects subject to U.S. jurisdiction. OFAC sanctions are intended to
address a variety of political concerns, especially to prevent certain countries, including Cuba, Iran,
Syria and Sudan, and certain individuals and entities in those and other countries, from supporting
international terrorism and, additionally to prevent Iran, North Korea and Syria, as well as certain
individuals and entities in those and other countries, from pursuing weapons of mass destruction and
missile programmes. The Bank does not believe that these sanctions are applicable to any of its
business. However, if the Bank’s New York branch provided the services mentioned above by any
means, or if it was otherwise determined that any of the Bank’s transactions violated the OFAC
regulations, the Bank could be subject to penalties, and its reputation and ability to conduct future
business in the United States or with U.S. entities could be adversely affected.

RISKS RELATING TO THE PRC BANKING INDUSTRY

The recent turmoil and upheaval in the global financial markets and the resulting overall slowdown
in the global economy and in particular in the PRC could materially and adversely affect the Bank’s
financial condition and results of operations.

Since July 2007, significant adverse developments in the U.S. sub-prime mortgage sector have created
significant disruption and volatility in global financial markets. The ensuing contraction of liquidity,
diminished credit availability, deterioration in asset values, increase in bankruptcies, rising
unemployment rates and declining confidence of consumption and business have caused an overall


                                                    72
slowdown in the global economy. Beginning in the second half of 2008 up to mid-2009, the world’s
largest economies, including the United States, Europe and Japan, were widely considered to be in the
midst of significant economic recessions, and major emerging economies such as the PRC and India
also faced substantial slowdown in their economic growth.


According to the statistics released by the PRC government, in the first quarter of 2009 when the
global economy was severely impacted by the financial crisis, the growth rate of the PRC’s gross
domestic products (GDP) decreased to 6.5 per cent. from 11.9 per cent. in the second quarter of 2008
prior to the outbreak of the global financial crisis.

Uncertainties in the global economies may adversely affect the Bank’s financial condition and results
of operation in many ways, including, the increased regulation and supervision of the financial
services industry in response to the financial crisis in certain jurisdictions where the Bank operates
may restrict its business flexibility and increase its compliance costs, which may adversely affect its
business operations.

The Bank has suffered an adverse impact from the global financial crisis. As at the end of 2009, the
Bank had made an allowance of RMB2,808 million (US$427 million) on a consolidated basis for
impairment losses on investments. PBOC carried out consecutive interest rate cuts during the global
financial crisis and economic downturn. The Bank’s net interest income decreased by 6.5 per cent. to
RMB245,821 million (US$37,405 million) for the year ended 31 December 2009 compared to
RMB263,037 million (US$40,025 million) for the year ended 31 December 2008 and its net interest
margin decreased to 2.26 per cent. and net interest spread decreased to 2.16 per cent. for the year
ended 31 December 2009 compared to 2.95 per cent. and 2.80 per cent., respectively, for the year
ended 31 December 2008. The widening of credit spreads has resulted in mark-to-market and realised
losses on the Bank’s investment and derivative portfolios, constrained its international debt capital
market borrowings and adversely impacted its profitability. The Bank remains subject, moreover, to
the risks posed by the indirect impact of the global credit crisis on the economy, some of which cannot
be anticipated and the vast majority of which are not in its control. The Bank also remains subject to
counterparty risk to financial institutions that fail or are otherwise unable to meet their obligations to
the Bank.

The Bank cannot assure you that the various macroeconomic measures and monetary policies adopted
by the PRC government will be effective in maintaining a sustainable growth in the PRC’s economy.
If further economic downturn occurs or continues, the Bank’s businesses, results of operations and
financial condition could be materially and adversely affected.

Financial instability in other countries, particularly emerging market countries and countries
where the Bank has established operations, could adversely affect the Bank’s business and the price
of the Notes.

Although the proximate cause of the recent global financial crisis, which has been deeper than other
recent financial crises, was the US residential mortgage market, investors should be aware that there
is a recent history of financial crises and boom-bust cycles in multiple markets in both the emerging
and developed economies which leads to risks for all financial institutions, including the Bank. A
future loss of investor confidence in the financial systems of the PRC or other markets and countries
or any financial instability in the PRC or any other market may cause increased volatility in the PRC
financial markets and, directly or indirectly, adversely affect the PRC economy and financial sector,
the Bank’s business and its future financial performance.


                                                   73
The Bank is subject to risks related to increasing competition in the banking industry in the PRC.

The banking industry in the PRC is becoming increasingly competitive. The Bank is competing
primarily with other PRC commercial banks and foreign banks. A number of foreign banks have
established locally incorporated banks in the PRC. In addition, the PRC’s Closer Economic
Partnership Arrangement (CEPA) arrangements with Hong Kong and Macau allow smaller banks from
those jurisdictions to operate in the PRC, a development which may also increase competition in the
banking industry in the PRC, which has also increased competition in the PRC banking industry.
Moreover, the PRC government has, in recent years, implemented a series of measures designed to
further liberalise the banking industry which are changing the basis on which the Bank competes with
other banks for customers.


The increasing competition may result in a decrease of the Bank’s market share in major product and
service areas, limit the growth of its deposits and loan portfolios and other products and services,
decrease its revenue, increase its expenses, and increase competition for qualified managers and
employees, each of which may adversely affect its business and prospects.

The Bank is subject to risks related to uncertain changes in the regulatory environment of the
banking industry in the PRC and other jurisdictions in which the Bank operates.


The Bank’s businesses are directly affected by changes in the PRC’s banking regulatory policies, laws
and regulations. The regulatory system and the laws and regulations governing the banking sector are
subject to future changes, and the Bank cannot assure you that such changes will not adversely affect
its business, financial condition and results of operations.


If additional rules or regulations are introduced, the Bank may incur substantial compliance and
monitoring costs. The Bank’s business could also be directly affected by any changes in the CBRC’s
or PBOC’s policies, laws and regulations, including in the areas of specific lending activities, loan
loss provisioning, capital adequacy and liquidity requirements as well as changes in other government
policies.

In addition, given the current economic and financial environment, the regulators may elect to alter
standards or the interpretation of the standards used to measure regulatory compliance or to determine
the adequacy of liquidity, certain risk management or other operational practices for financial services
companies in a manner that impacts the Bank’s ability to implement its strategy and such changes
could affect the Bank in substantial and unpredictable ways and could have a material adverse effect
on the Bank’s business, cash flows, financial condition, results of operations and prospects.

In particular, there has recently been public debate in some developed economies to the effect that
banks which are “too big too fail” and which pose greater systemic risks to the economy (and
taxpayers) in the event of failure should face higher capital requirements and be subject to more
stringent regulatory requirements as compared to other banks that would not fall within the “too big
too fail” category, or even broken up into smaller units. Given that the Bank is the largest bank in the
PRC by market capitalisation, if any new regulations or regulatory policies are introduced in the PRC
which specifically deal with this issue, then it may face stricter capital requirements or leverage limits
or other additional and unpredictable restrictions on its activities as compared to its less regulated
competitors. The impact of such additional regulations, reforms and restrictions may place the Bank
at a competitive disadvantage compared to its less regulated competitors.



                                                   74
In addition, the Bank’s overseas branches, subsidiaries and representative offices have to comply with
local laws and regulations of the relevant jurisdiction, and are subject to regulation and approval by
the local regulatory authorities in the relevant jurisdiction. The Bank cannot assure you that its
overseas branches, subsidiaries and representative offices could always satisfy applicable laws and
regulatory requirements. If the Bank could not meet such requirements, its business in the relevant
jurisdiction may be adversely affected.

The Bank is subject to risks related to changes in monetary policy.

PRC monetary policy is set by the PBOC in accordance with the macroeconomic environment. In
addition, PBOC controls monetary supply through open market operations, and adjustments to the
deposit reserve ratio and rediscount rate in order to achieve targeted control over the economy. As
commercial banks are a major means to implement monetary policy, changes in monetary policy will
affect their operations and profitability. If the Bank cannot timely adjust its operating strategy in
response to the changes in monetary policy, its results of operations and financial condition may be
adversely affected.

The Bank is subject to risks related to potential capital adequacy ratio fluctuation.

According to the CBRC regulations, as a PRC commercial bank, the Bank is required to maintain a
minimum capital adequacy ratio of 8 per cent. and a minimum core capital adequacy ratio of 4 per
cent.. In addition, the capital adequacy ratio must not be less than 10 per cent. when the Bank
undertakes acquisition finance.

As at 30 September 2010, 30 June 2010, 31 December 2009, 31 December 2008 and 31 December
2007, the Bank’s capital adequacy ratios were 11.57 per cent., 11.34 per cent., 12.36 per cent., 13.06
per cent. and 13.09 per cent. respectively, while its core capital adequacy ratios were 9.33 per cent.,
9.41 per cent., 9.90 per cent., 10.75 per cent. and 10.99 per cent., respectively, which were in
compliance with regulatory requirements. The issuance of Rights Shares on 23 December 2010 has
further increased the Bank’s capital adequacy ratio, therefore further strengthening its capacity of risk
resistance and sustainable development.

The Bank aims to maintain a stable and reasonable capital adequacy level in order to support the
implementation of its business development and strategic planning. However, certain adverse changes
may lead to fluctuations of the Bank’s capital adequacy ratio. Such adverse changes include, but are
not limited to, the increase of risk-weighted assets due to rapid business expansion, the increase of
capital-deducting equity acquisitions and investments, potential deterioration in the Bank’s asset
quality, the decline in the value of the Bank’s investments, the decline in the Bank’s net profits leading
to decreases in retained earnings, the increase of the minimum capital adequacy ratio requirement by
the CBRC as well as changes in the computational method for the capital adequacy ratio by the CBRC.

The Bank does not expect the PRC government to provide additional financial support to it in the
future. The Bank may be required to raise additional core or supplementary capital in the future in
order to meet the minimum CBRC capital adequacy requirements.

To raise additional capital in order to meet the minimum CBRC capital adequacy requirement, the
Bank may need to issue additional equity securities that qualify as core capital or additional
subordinated bonds that qualify as supplementary capital. However, the Bank’s ability to obtain
additional capital may still be restricted by a number of factors, including its future business, financial
condition, results of operations and cash flows; necessary government regulatory approvals; its credit
rating; general market conditions for capital-raising activities by commercial banks and other
financial institutions; and economic, political and other conditions both within and outside the PRC.


                                                    75
The Bank cannot assure you that it will be able to obtain additional capital on commercially
reasonable terms in a timely manner, or at all. As such, there can be no assurance that it will continue
to be able to comply with its capital adequacy requirements.

Furthermore, the CBRC may increase the minimum capital adequacy requirements or change the
methodology for calculating regulatory capital or capital adequacy ratios or the Bank may otherwise
be subject to new capital adequacy requirements. In recent years, the CBRC has issued several
regulations and guidelines governing capital adequacy requirements applicable to commercial banks
in the PRC. In February 2007, the CBRC promulgated the “Guidelines on the Implementation of Basel
II in China’s Banking Industry”, indicating that the first batch of commercial banks will be regulated
according to Basel II from 2010 or in any case no later than 2013. The Bank has always been actively
promoting the implementation of Basel II. If it was approved to be one of the banks governed by Basel
II, its capital adequacy ratio may change due to modification in its computational method.

If the Bank’s capital adequacy ratios do not meet the regulatory requirements, the regulatory
authorities may adopt certain correction measures including, but not limited to, restricting the growth
of the Bank’s risk-bearing assets, suspending all of its operation activities other than low-risk
business, as well as restricting its dividend payment, which may adversely affect its reputation,
financial condition and results of operations.

The Bank is subject to reputational risks related to its business operations.

The Bank has made active efforts in reputational risk management and through a number of actions
such as actively communicating its operational and management information, enhancing the quality of
its financial services, strengthening investor relations management and actively performing social
responsibility, has strived to gain the understanding and recognition of its customers, investors and the
media in order to maintain a good reputation.

With the rapid development of the financial industry and changes in media communication, the public
are paying increasing attention to the banking industry, resulting in easier and more frequent access
to rumours related to banks’ services quality, their operations and management and compliance issues.
Such coverage may create negative feedback from depositors, investors and other stakeholders, which
may adversely affect the Bank’s normal operation and management, and may cause a liquidity crisis
in extreme cases.

Within the banking industry, the banks have close interbank relationships with one another and
interbank deposits and lending are relatively common. If a certain bank does not operate properly or
becomes insolvent, a chain reaction may occur, which may trigger a crisis of confidence towards the
whole banking industry, and adversely affect the Bank’s financial condition and results of operations.

RISKS RELATING TO THE PRC AND OTHER ECONOMIC CONDITIONS AND MARKET
RISKS

The PRC’s economic, political and social conditions, as well as government policies, could affect
the Bank’s businesses.

A substantial majority of the Bank’s businesses, assets and operations are located in the PRC.
Accordingly, the Bank’s financial condition, results of operations and business prospects are, to a
significant degree, subject to the economic, political and legal developments in the PRC. The PRC’s
economy differs from the economies of most developed countries in many respects, including, among
other things, government involvement, level of development, growth rate, control of foreign exchange
and allocation of resources.


                                                   76
The PRC’s economy has historically been a planned economy. A substantial portion of productive
assets in the PRC is still owned by the PRC government. The government also exercises significant
control over the PRC’s economic growth by allocating resources, setting monetary policy and
providing preferential treatment to particular industries or companies. In recent years, the PRC
government has pushed forward a large number of economic reform measures to introduce market
forces and promote the establishment of sound corporate governance structure. Such economic reform
measures may be adjusted, modified or applied according to different industries and different regions
of the country. As a result, the Bank may not benefit from certain of such measures.

The PRC government has the power to implement macroeconomic controls affecting the PRC’s
economy. The government has implemented various measures in an effort to control the growth rate
of certain industries and restrain inflation. For example, in response to a decreased growth rate in part
as a result of the global financial crisis and economic slowdown, beginning in September 2008, among
other measures, the PRC government began to implement a series of macroeconomic measures and
moderately loose monetary policies, which included announcing an economic stimulus package in the
aggregate amount of RMB4 trillion (US$0.6 trillion) and reducing benchmark interest rates. A number
of these macroeconomic measures may materially and adversely affect the Bank’s financial condition,
results of operations and asset quality. For example, the decreases in the PBOC benchmark interest
rates in 2008 have resulted in the narrowing of the Bank’s net interest spread and a decrease in its net
interest income for the year ended 31 December 2009 compared with the same period in 2008, which
adversely affected its profitability.

The PRC has been one of the world’s fastest-growing economies in recent years in terms of GDP.
However, the PRC may not be able to sustain such a growth rate. During the recent global financial
crisis and economic slowdown, growth of the PRC’s GDP slowed down. If the PRC’s economy
experiences a decrease in growth rate or a significant downturn, the unfavourable business
environment and economic condition for the Bank’s customers could negatively impact their ability
or willingness to repay its loans and reduce their demand for its banking services. The Bank’s
financial condition, results of operations and business prospects may be materially and adversely
affected.

The PRC legal system could limit the legal protections available to you and may involve
uncertainties.

The Bank is organised under the laws of the PRC. The PRC legal system is based on written statutes.
The PRC government has promulgated laws and regulations dealing with such economic matters as the
issuance and trading of securities, shareholder rights, foreign investment, corporate organisation and
governance, commerce, taxation and trade. However, many of these laws and regulations continue to
evolve, may be subject to different interpretations and may be inconsistently enforced. In addition,
there is only a limited volume of published court decisions which may be cited for reference, but such
cases have limited precedent value as they are not binding on subsequent cases. These uncertainties
relating to the interpretation of PRC laws and regulations can affect the legal remedies and protections
that are available to you and can adversely affect the value of your investment.

Certain PRC regulations limit the Bank’s ability to diversify its investments, and as a result, a
decrease in the value of a particular type of investment may have a material adverse effect on the
Bank’s financial condition and results of operations.

As a result of current PRC regulatory restrictions, substantially all of the Bank’s RMB-denominated
investment assets are concentrated in a limited number of investments permitted for PRC commercial
banks, such as PRC government bonds, bonds issued by PRC policy banks, bonds and subordinated
notes issued by PRC commercial banks, PBOC bills and commercial paper issued by qualified


                                                   77
domestic corporations. These restrictions on the Bank’s ability to diversify its investment portfolio
limit its ability to seek higher returns by making investments comparable with those of the banks in
other countries as well as its ability to manage its liquidity in the same manner as banks in other
countries. In addition, the Bank is exposed to a significantly greater level of risk of investment loss
in the event that a particular type of investment it holds suffers a decrease in value as a result of the
concentration of its RMB-denominated investment assets. For example, any deterioration of the
financial conditions of commercial banks in the PRC would increase the risks associated with holding
their bonds and subordinated bonds. A decrease in the value of any of these types of investments could
have a material adverse effect on the Bank’s financial condition and results of operations.

The Bank is subject to interest rate risk.


A significant portion of the Bank’s assets consists of, and a significant portion of its revenue is derived
from, assets that are monetary in nature. The Bank engages in limited proprietary trading through
positions in fixed-income instruments and, to some extent in financial derivative instruments, which
are subject to normal risks associated with proprietary investing activities, including the risk that a
change in market prices, rates, indices, volatility, correlations, liquidity or other factors will result in
losses for a specific position or portfolio.

The Bank’s net interest income is affected by changes in interest rates. Its net interest income
represented 79.8 per cent., 79.2 per cent., 79.4 per cent., 84.8 per cent. and 87.2 per cent. of total
operating income in the nine months ended 30 September 2010, the six months ended 30 June 2010,
in 2009, in 2008 and in 2007, respectively. The Bank has closely monitored market changes and made
effective adjustments to changes in monetary policy direction and improved its interest rate
management and monitoring system. However, increasing competition in the banking industry and
further liberalisation of the interest rate regime may result in more volatility in interest rates. Changes
in PBOC benchmark interest rates or volatility in market interest rates may adversely affect the Bank’s
net interest income, which may affect its financial condition and results of operations.

PBOC increased the benchmark interest rates on Renminbi loans and deposits for financial institutions
on 20 October 2010 and again on 25 December 2010, of which, the benchmark interest rates on loans
and deposits with a term of one year increased by a total of 0.5 percentage points, and the benchmark
interest rates on loans and deposits with other terms of maturity were being adjusted accordingly.
Interest rates on demand deposits, deposit reserves, re-financing loans and discounted loans remain
unchanged. It is forecasted that such increase in interest rates will have a relatively minor impact on
the Bank’s future results of operations.

The yield arising from the Bank’s investment in debt securities is affected by changes in interest rates.
As at 30 June 2010, its net investment amount in RMB-denominated government bonds, central bank
bills and other debt securities was RMB3,629,703 million (US$ 552,315 million), which represented
28.01 per cent. of its total assets as at such date. Changes in market interest rates may affect the yield
from the Bank’s investment in debt securities and thus may further adversely affect its financial
condition and results of operations.

The following table illustrates the effect of reasonable and possible interest rate changes on the Bank’s
net interest income and equity with other variables held constant. The sensitivity of net interest
income is the effect of certain assumed changes in interest rates on the net interest income, based on
the financial assets and financial liabilities held at year-end which are subject to re-pricing within the
coming year, including the effect of hedging instruments, on the assumption that the overall interest


                                                    78
rate in the market moves in parallel. The sensitivity of equity is the effect of certain assumed changes
in interest rates on the fair value of fixed-rate available-for-sale financial assets held at year-end and
as a result changes to other comprehensive income, including the effect of hedging instruments, on the
assumption that the overall interest rate in the market move in parallel.


                                                                                              Unit: In RMB

                                                             As at
                                                            30 June              As at 31 December
                           Changes in interest rates         2010         2009         2008          2007

                                                            (RMB)        (RMB)        (RMB)       (RMB)
Sensitivity of net    Increase by 100 basis points           (22,639)     (17,273)     (16,116)      (18,160)
  interest income     Decrease by 100 basis points            22,639       17,273       16,116        18,160
Sensitivity of equity Increase by 100 basis points           (18,367)     (16,505)      (9,143)       (9,213)
                      Decrease by 100 basis points            19,477       17,385        9,536         9,452

It should also be noted that changes in interest rates, changes in relationship between short-term and
long-term interest rates, or changes in relationship between different types of interest rates can affect
the interest rate charged on interest-earning assets to different degrees than the interest rate paid on
interest-bearing liabilities. This impact may be increased by the Bank’s inability to adjust to rate
changes with respect to the fixed rate portions of its portfolio.

In an increasing interest rate environment, the ability of the Bank to earn higher returns on its fixed
rate interest-earning assets consistent with the change in the market rates is limited by the maturity
periods of such assets. The maturity periods of the Bank’s interest-earning assets tend to be longer
than such periods for its interest-bearing liabilities.


The Bank may also experience decreases in net interest income in a declining interest rate
environment. Further, during a rising interest rate environment, its ability to adjust upwards the
Bank’s interest rates that it receives on its interest-bearing assets, mainly loans, may be limited,
whether due to competition or other factors as its customers may repay existing loans with it prior to
their maturity through other refinancings that may bear lower rates of interest. How the Bank manages
interest rate volatility generally will determine, to a certain extent, the impact of such volatility on its
net interest and dividend income, and it cannot assure you that it will be able to manage such volatility
in a manner that does not adversely affect its results of operations.

The Bank is subject to currency risk such as future movements in exchange rates and PRC
government controls on currency conversion.

The Bank receives a substantial majority of its revenues in Renminbi, which is currently not a freely
convertible currency. A portion of these revenues must be converted into other currencies in order to
meet the Bank’s foreign currency obligations. The Bank is currently required to obtain the approval
of SAFE before converting significant sums of foreign currencies into Renminbi. Under the PRC’s
existing foreign exchange regulations, by complying with certain procedural requirements, the Bank
will be able to pay dividends in foreign currencies without prior approval from the State
Administration of Foreign Exchange (SAFE). However, in the future, the PRC government may, at its
discretion, take measures to restrict access to foreign currencies for current account transactions under
certain circumstances.




                                                    79
The Bank is subject to currency risk arising from losses incurred by unfavourable exchange rate
fluctuations on its foreign exchange exposures resulting from the unmatched currency structure
between foreign currency-denominated assets and foreign currency-denominated liabilities.

The value of the Renminbi against the U.S. dollar and other currencies fluctuates and is affected by,
among other things, changes in the PRC and international political and economic conditions. Since
1994, the conversion of Renminbi into foreign currencies, including Hong Kong and U.S. dollars, has
been based on rates set by the PBOC, which are set daily based on the previous business day’s
interbank foreign exchange market rates and current exchange rates on the world financial markets.
From 1994 to 20 July 2005, the official exchange rate for the conversion of Renminbi to U.S. dollars
was generally stable. On 21 July 2005, the PRC government adopted a more flexible managed floating
exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band that is
based on market supply and demand and reference to a basket of currencies. On the same day, the
value of the Renminbi appreciated by approximately 2 per cent. against the U.S. dollar. In August
2008, the PRC announced a further change in its exchange regime to a managed floating exchange rate
regime based on market supply and demand.

Any appreciation of the Renminbi against the U.S. dollar or any other foreign currencies may result
in the decrease in the value of the Bank’s foreign currency-denominated assets. Conversely, any
devaluation of the Renminbi may adversely affect the value of, and any dividends payable on, the
Bank’s H Shares in foreign currency terms. As at 31 December 2009, the amount of the Bank’s assets
denominated in foreign currencies was 5.5 per cent.. As at such date, 3.9 per cent. of the Bank’s
liabilities were denominated in foreign currencies.

As at 30 June 2010, the Bank’s net foreign exchange exposure was RMB62,508 million (US$9,512
million). The Bank manages its foreign exchange risk through various methods, including exposure
limit management and risk hedging to mitigate currency risk, and performs currency risk sensitivity
analysis and stress testing regularly. However, changes in exchange rates in the future may adversely
affect the Bank’s financial condition and results of operations.


The table below illustrates the sensitivity analysis of exchange rate changes of currencies to which the
Bank has significant exposure on its monetary assets and liabilities and its future cash flow. The
analysis calculates the effect of a reasonably possible movement in the exchange rate against the
RMB, with all other variables held constant, on profit before tax.

                                                            As at
                                                           30 June             As at 31 December
Currency                       Changes in exchange rates    2010        2009         2008          2007
                                                           (against             (against RMB)
                                                            RMB)
USD. . . . . . . . . . . . .              1%                     (69)      (59)           85          999
                                         -1%                      69        59           (85)        (999)
HKD . . . . . . . . . . . .               1%                     (16)      (30)         (115)        (151)
                                         -1%                      16        30           115          151

The above currency risk factors could materially and adversely affect the Bank’s financial condition,
results of operations and compliance with capital adequacy ratios and operational ratios.




                                                      80
Any future occurrence of natural disasters or outbreaks of contagious diseases in the PRC may have
a material adverse effect on the Bank’s business operations, financial condition and results of
operations.

Any future occurrence of natural disasters or outbreaks of health epidemics and contagious diseases,
including avian influenza, severe acute respiratory syndrome, or SARS, and swine flu caused by the
H1N1 virus, or H1N1 flu, may materially and adversely affect the Bank’s business and results of
operations. Since April 2009, there have been reports on the occurrences of H1N1 flu in certain
regions of the world, including the PRC and Hong Kong where the Bank operates its principal
business. An outbreak of a health epidemic or contagious disease could result in a widespread health
crisis and restrict the level of business activity in affected areas, which may in turn adversely affect
the Bank’s business. Moreover, the PRC has experienced natural disasters such as earthquakes, floods
and drought in the past few years such as the massive earthquake that occurred in Wenchuan County,
Sichuan Province, PRC on 12 May 2008. Any future occurrence of severe natural disasters in the PRC
may adversely affect its economy and in turn the Bank’s business. There is no guarantee that any
future occurrence of natural disasters or outbreak of avian influenza, SARS, H1N1 flu or other
epidemics, or the measures taken by the PRC government or other countries in response to a future
outbreak of these epidemics, will not seriously interrupt the Bank’s operations or those of its
customers, which may have a material adverse effect on its results of operations.

RISKS RELATING TO THE NOTES

The Notes may not be a suitable investment for all investors.

Each potential investor in the Notes must determine the suitability of that investment in light of its
own circumstances. In particular, each potential investor should:

•    have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the
     merits and risks of investing in the Notes and the information contained or incorporated by
     reference in this Offering Circular or any applicable supplement;

•    have access to, and knowledge of, the appropriate analytical tools to evaluate, in the context of
     its particular financial situation, an investment in the Notes and the impact the Notes will have
     on its overall investment portfolio;

•    have sufficient financial resources and liquidity to bear all of the risks of an investment in the
     Notes, including Notes with principal or interest payable in one or more currencies, or where the
     currency for principal or interest payments is different from the potential investor’s currency;

•    understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant
     indices and financial markets; and

•    be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for
     economic, interest rate and other factors that may affect its investment and its ability to bear the
     applicable risks.

Some Notes are complex financial instruments and such instruments may be purchased as a way to
reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall
portfolios. A potential investor should not invest in Notes which are complex financial instruments
unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes will
perform under changing conditions, the resulting effects on the value of the Notes and the impact this
investment will have on the potential investor’s overall investment portfolio.


                                                   81
Investors shall pay attention to any modification, waivers and substitution.

The Conditions of the     Notes contain provisions for calling meetings of Noteholders to consider
matters affecting their   interests generally. These provisions permit defined majorities to bind all
Noteholders, including     Noteholders who did not attend and vote at the relevant meeting and
Noteholders who voted     in a manner contrary to the majority.

Risks related to the structure of a particular issue of Notes.

A wide range of Notes may be issued under the Programme. A number of these Notes may have
features which contain particular risks for potential investors. Set out below is a description of the
most common such features:

Notes subject to optional redemption

An optional redemption feature of Notes is likely to limit their market value. During any period when
the Bank may elect to redeem Notes, the market value of those Notes generally will not rise
substantially above the price at which they can be redeemed. This also may be true prior to any
redemption period.

The Bank may be expected to redeem Notes when its cost of borrowing is lower than the interest rate
on the Notes. At those times, an investor generally would not be able to reinvest the redemption
proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may
only be able to do so at a significantly lower rate. Potential investors should consider reinvestment
risk in light of other investments available at that time.

Variable rate Notes with a multiplier or other leverage factor

Notes with variable interest rates can be volatile investments. If they are structured to include
multipliers or other leverage factors, or caps or floors, or any combination of those features or other
similar related features, their market values may be even more volatile than those for securities that
do not include those features.

Inverse Floating Rate Notes

Inverse Floating Rate Notes have an interest rate equal to a fixed rate minus a rate based upon a
reference rate such as LIBOR. The market values of those Notes typically are more volatile than
market values of other conventional floating rate debt securities based on the same reference rate (and
with otherwise comparable terms). Inverse Floating Rate Notes are more volatile because an increase
in the reference rate not only decreases the interest rate of the Notes, but may also reflect an increase
in prevailing interest rates, which further adversely affects the market value of these Notes.

Fixed/Floating Rate Notes

Fixed/Floating Rate Notes may bear interest at a rate that converts from a fixed rate to a floating rate,
or from a floating rate to a fixed rate. Where the Bank has the right to effect such a conversion, this
will affect the secondary market and the market value of the Notes since the Bank may be expected
to convert the rate when it is likely to produce a lower overall cost of borrowing. If the Bank converts
from a fixed rate to a floating rate in such circumstances, the spread on the Fixed/Floating Rate Notes
may be less favourable than then prevailing spreads on comparable Floating Rate Notes tied to the
same reference rate. In addition, the new floating rate at any time may be lower than the rates on other
Notes. If the Bank converts from a floating rate to a fixed rate in such circumstances, the fixed rate
may be lower than the then prevailing rates on its Notes.


                                                   82
Notes issued at a substantial discount or premium

The market values of securities issued at a substantial discount or premium from their principal
amount tend to fluctuate more in relation to general changes in interest rates than do prices for
conventional interest-bearing securities. Generally, the longer the remaining term of the securities, the
greater the price volatility as compared to conventional interest-bearing securities with comparable
maturities.

Index Linked Notes and Dual Currency Notes

The Bank may issue Notes with principal or interest determined by reference to an index or formula,
to changes in the prices of securities or commodities, to movements in currency exchange rates or
other factors (each a Relevant Factor). In addition, it may issue Notes with principal or interest
payable in one or more currencies which may be different from the currency in which the Notes are
denominated. Potential investors should be aware that:

(i)    the market price of such Notes may be volatile;

(ii)   they may receive no interest;

(iii) the payment of principal or interest may occur at a different time or in a different currency than
      expected;

(iv) the amount of principal payable at redemption may be less than the nominal amount of such
     Notes or even zero;

(v)    a Relevant Factor may be subject to significant fluctuations that may not correlate with changes
       in interest rates, currencies or other indices;

(vi) if a Relevant Factor is applied to Notes in conjunction with a multiplier greater than one or
     contains some other leverage factor, the effect of changes in the Relevant Factor on principal or
     interest payable will likely be magnified; and

(vii) the timing of changes in a Relevant Factor may affect the actual yield to investors, even if the
      average level is consistent with their expectations. In general, the earlier the change in the
      Relevant Factor, the greater the effect on yield.

Partly-paid Notes

The Bank may issue Notes where the issue price is payable in more than one instalment. Failure to
pay any subsequent instalment could result in an investor losing all of its investment.

Risks related to the Notes generally

Set out below is a brief description of certain risks relating to the Notes generally:

EU Savings Directive

Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States are
required to provide to the tax authorities of another Member State details of payments of interest (or
similar income) paid by a person within its jurisdiction to an individual resident in that other Member
State or to certain limited types of entities established in that other Member State. However, for a
transitional period, Luxembourg and Austria are instead required (unless during that period they elect
otherwise) to operate a withholding system in relation to such payments (the ending of such


                                                   83
transitional period being dependent upon the conclusion of certain other agreements relating to
information exchange with certain other countries). A number of non-European Union countries and
territories including Switzerland have adopted similar measures (a withholding system in the case of
Switzerland).

The European Commission has proposed certain amendments to the Directive, which may, if
implemented, amend or broaden the scope of the requirements described above.

If a payment were to be made or collected through a Member State which has opted for a withholding
system and an amount of, or in respect of, tax were to be withheld from that payment, neither the Bank
nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect
to any Note as a result of the imposition of such withholding tax. The Bank is required to maintain
a Paying Agent in a Member State that is not obliged to withhold or deduct tax pursuant to the
Directive.

Change of law

The conditions of the Notes are based on English law in effect as at the date of this Offering Circular.
No assurance can be given as to the impact of any possible judicial decision or change to English law
or administrative practice after the date of this Offering Circular.

Notes where denominations involve integral multiples: definitive Notes

In relation to any issue of Notes which have denominations consisting of a minimum Specified
Denomination plus one or more higher integral multiples of another smaller amount, it is possible that
such Notes may be traded in amounts that are not integral multiples of such minimum Specified
Denomination. In such a case a holder who, as a result of trading such amounts, holds an amount
which is less than the minimum Specified Denomination in his account with the relevant clearing
system at the relevant time may not receive a definitive Note in bearer form in respect of such holding
(should such Notes be printed) and would need to purchase a principal amount of Notes such that its
holding amounts to a Specified Denomination.

If definitive Notes are issued, holders should be aware that definitive Notes which have a
denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid
and difficult to trade.

Reliance on Euroclear and Clearstream, Luxembourg procedures

Notes issued under the Programme will be represented on issue by one or more Global Notes that may
be deposited with a common depositary for Euroclear and Clearstream, Luxembourg or (each as
defined under “Form of the Notes”). Except in the circumstances described in each Global Note,
investors will not be entitled to receive Notes in definitive form. Each of Euroclear and Clearstream,
Luxembourg and their respective direct and indirect participants will maintain records of the
beneficial interests in each Global Note held through it. While the Notes are represented by a Global
Note, investors will be able to trade their beneficial interests only through the relevant clearing
systems and their respective participants.

While the Notes are represented by Global Notes, the Bank will discharge its payment obligation under
the Notes by making payments through the relevant clearing systems. A holder of a beneficial interest
in a Global Note must rely on the procedures of the relevant clearing system and its participants to
receive payments under the Notes. The Bank has no responsibility or liability for the records relating
to, or payments made in respect of, beneficial interests in any Global Note.


                                                  84
Holders of beneficial interests in a Global Note will not have a direct right to vote in respect of the
Notes so represented. Instead, such holders will be permitted to act only to the extent that they are
enabled by the relevant clearing system and its participants to appoint appropriate proxies.

Risks related to the market generally

Set out below is a brief description of the principal market risks, including liquidity risk, exchange
rate risk, interest rate risk and credit risk:

The secondary market generally

Notes may have no established trading market when issued, and one may never develop. If a market
does develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily
or at prices that will provide them with a yield comparable to similar investments that have a
developed secondary market. This is particularly the case for Notes that are especially sensitive to
interest rate, currency or market risks, are designed for specific investment objectives or strategies or
have been structured to meet the investment requirements of limited categories of investors. These
types of Notes generally would have a more limited secondary market and more price volatility than
conventional debt securities. Illiquidity may have a severely adverse effect on the market value of
Notes.

Exchange rate risks and exchange controls

The Bank will pay principal and interest on the Notes in the Specified Currency. This presents certain
risks relating to currency conversions if an investor’s financial activities are denominated principally
in a currency or currency unit (the Investor’s Currency) other than the Specified Currency. These
include the risk that exchange rates may significantly change (including changes due to devaluation
of the Specified Currency or revaluation of the Investor’s Currency) and the risk that authorities with
jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation
in the value of the Investor’s Currency relative to the Specified Currency would decrease (1) the
Investor’s Currency-equivalent yield on the Notes, (2) the Investor’s Currency equivalent value of the
principal payable on the Notes and (3) the Investor’s Currency equivalent market value of the Notes.

Government and monetary authorities may impose (as some have done in the past) exchange controls
that could adversely affect an applicable exchange rate. As a result, investors may receive less interest
or principal than expected, or no interest or principal.

Credit ratings may not reflect all risks

One or more independent credit rating agencies may assign credit ratings to the Notes. The ratings may
not reflect the potential impact of all risks related to structure, market, additional factors discussed
above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation
to buy, sell or hold securities and may be revised or withdrawn by its assigning rating agency at any
time.

Legal investment considerations may restrict certain investments

The investment activities of certain investors are subject to legal investment laws and regulations, or
review or regulation by certain authorities. Each potential investor should consult its legal advisers
to determine whether and to what extent (1) Notes are legal investments for it, (2) Notes can be used


                                                   85
as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge
of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators
to determine the appropriate treatment of Notes under any applicable risk-based capital or similar
rules.


RISKS RELATING TO THIS OFFERING CIRCULAR

Risks relating to unaudited, unreviewed interim financial statements deemed incorporated by
reference.

Any published unaudited, unreviewed interim financial statements of the Bank (whether prepared on
a consolidated or a non-consolidated basis) which are, from time to time, deemed to be incorporated
by reference in this Offering Circular will not have been audited or subject to a review by the auditors
of the Bank. Accordingly, there can be no assurance that, had an audit or a review been conducted in
respect of such financial statements, the information presented therein would not have been materially
different, and investors should not place undue reliance on them.

The Bank cannot assure you of the accuracy or comparability of facts, forecasts and statistics
contained in this Offering Circular with respect to the PRC, its economy or the PRC and global
banking industries.


Facts, forecasts and statistics in this Offering Circular relating to the PRC, the PRC’s economy and
the PRC and global banking industries, including the Bank’s market share information, are derived
from various governmental sources which are generally believed to be reliable. However, the Bank
cannot guarantee the quality and reliability of such material. In addition, these facts, forecasts and
statistics have not been independently verified by the Bank and may not be consistent with information
available from other sources, and may not be complete or up to date. The Bank has taken reasonable
care in reproducing or extracting the information from such sources. However, because of potentially
flawed methodologies, discrepancies in market practice and other problems, these facts, forecasts and
other statistics may be inaccurate or may not be comparable from period to period or to facts, forecasts
or statistics of other economies.

Risks relating to forward-looking statements.

The Bank has included certain statements in this Offering Circular which constitute “forward-looking
statements” (the meaning of which is discussed above under “Cautionary statement regarding
forward-looking statements”). Actual results may differ materially from those suggested by the
forward-looking statements due to certain risks or uncertainties associated with the Bank’s
expectations with respect to, but not limited to, its ability to successfully implement its strategy, its
ability to integrate recent or future mergers or acquisitions into its operations, future levels of
non-performing assets and restructured assets, its growth and expansion, the adequacy of its provision
for credit and investment losses, technological changes, investment income, its ability to market new
products, cash flow projections, the outcome of any legal or regulatory proceedings it is or becomes
a party to, the future impact of new accounting standards, its ability to pay dividends, its ability to
roll over its short-term funding sources, its exposure to operational, market, credit, interest rate and
currency risks and the market acceptance of and demand for Internet banking services. Accordingly,
undue reliance must not be placed on such forward-looking statements.




                                                   86
                                                                                           EXCHANGE RATES

The following table shows the exchange rate of Chinese RMB against US Dollars on the basis of the
middle exchange rates during the periods indicated. The Chinese Renminbi middle exchange rate is
calculated on the basis of the published buying and selling rates of the People’s Bank of China
(PBOC). No representations are made that the RMB or US Dollar amounts referred to herein could
have been or could be converted into US Dollars or Chinese RMB, as the case may be, at the rate
indicated or at any other rate or at all.

                                                                                                                            Year Ended 31 December

                                                                                                               At Period
                                                                                                                  End       Average (1)    High (2)    Low (3)
                                                                                                                               (RMB per US$1.00)
2007 . . . . .    .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       7.3037        7.6066       7.8160      7.3037
2008 . . . . .    .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       6.8346        6.9451       7.2996      6.8009
2009 . . . . .    .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       6.8282        6.8310       6.8399      6.8201
2010 . . . . .    .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       6.6227        6.7695       6.8284      6.6227
2011
  January . .     .......................                                                                          6.5891        6.6027       6.6349      6.5876
  February .      .......................                                                                          6.5752        6.5831       6.5985      6.5705

Notes:


(1)      Simple arithmetic average of the middle market spot rates of exchange for RMB against the US Dollar quoted by the
         PBOC for the period.


(2)      Highest rate among the middle market spot rates of exchange for RMB against the US Dollar quoted by the PBOC for
         the period.


(3)      Lowest rate among the middle market spot rates of exchange for RMB against the US Dollar quoted by the PBOC for
         the period.




                                                                                                                  87
                                 CAPITALISATION AND INDEBTEDNESS

The following table sets forth the Group’s consolidated capitalization and indebtedness as at 30
September, 2010. The table should be read in conjunction with the Group’s unaudited consolidated
financial statements and the accompanying notes included in this Offering Circular.

                                                                                                                                                                      As at September 30,2010

                                                                                                                                                                         (RMB in million)
        (1)
Debt
 Bonds issued
    - Callable subordinated bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                            75,000
    - A Share Convertible Corporate Bonds (2) . . . . . . . . . . . . . . . . . . . .                                                                                                  21,949
                                                                                                                                                                                       96,949
     Other borrowing
       - Notes issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                     94
                                                                                                                                                                                           94
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                               97,043


Equity
  Share capital. . . . . . . . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                   334,019
  Capital reserve (2) . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                   110,231
  Surplus reserves . . . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                    37,527
  General reserves . . . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                    84,291
  Currency translation differences                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                      (488)
  Undistributed profits . . . . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                   188,252
                                                                                                                                                                                      753,832
Non-controlling Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                      5,673


Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                              759,505


Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                  856,548


1.       In addition, as at 30 September,2010, the Bank had deposits from customers, amounts due to
         banks and other financial institutions, certificates of deposits issued, balances under repurchase
         agreements, credit commitments, acceptance, issued letters of guarantee and letters of credit,
         other commitments and contingencies, including outstanding litigation, that arise from its
         ordinary course of business.

2.       The Bank issued A share convertible bonds on 31 August 2010 with a par value of RMB25,000
         million. When convertible bonds were issued, the Bank recognized separately the liability
         component and the equity component in bonds payable and capital reserve, respectively, on
         initial recognition. Any attributable transaction costs related to the issuance are allocated to
         liability and equity components in proportion to their respective fair values. As at 30 September,
         2010, the liability component and the equity component of the convertible bonds were
         RMB21,949 million and RMB2,985 million, respectively.

3.       Except as disclosed above, as at 30 September 2010, the Bank did not have any outstanding
         mortgages, charges, debentures, or other loan capital (issued or agreed to be issued), bank
         overdrafts, loans, liabilities under acceptance or other similar indebtedness, hire purchase and
         finance lease commitments or any guarantees, or other material contingent liabilities.


                                                                                              88
                                      DESCRIPTION OF THE BANK

INTRODUCTION

History

The Bank was established on 1 January 1984 as a state-owned specialised bank to assume all
commercial banking functions of the PBOC following its official designation as the PRC’s central
bank. From 1984 to 1993, the Bank operated as a state-owned specialised bank. During this period,
it expanded its operations and distribution network, strengthened its financial accounting and
management systems and increased its focus on profitability and risk management. The Bank became
a state-owned commercial bank in 1994 following the establishment of the three policy banks that
assumed substantially all policy lending functions of the state-owned specialised banks, which later
became the “Big Four” commercial banks. From 1994 to 2004, the Bank made significant
improvements to many aspects of its operations to bring its business practices in line with those of
a modern commercial bank, including enhancing its capital base, operational performance, asset
quality, risk management, information technology, internal controls, organisational structure, business
processes and management transparency.

Over the last fifteen years the PRC government has undertaken a number of initiatives to strengthen
the capital base and asset quality of state-owned commercial banks. The MOF issued an RMB85.0
billion (US$12.9 billion), 30-year special government bond to the Bank and used the proceeds as a
capital contribution to it in 1998, as part of the government’s effort to improve the capital adequacy
of the Big Four commercial banks. In 1999 and 2000, the Bank transferred non-performing assets in
the aggregate amount of RMB407.7 billion (US$62.0 billion) at book value to China Huarong Asset
Management Corporation (Huarong). As consideration for the transfer, the Bank received RMB94.7
billion (US$14.4 billion) in cash and non-transferable 10-year bonds issued by Huarong with an
aggregate face value of RMB313.0 billion (US$47.6 billion) during the period from 1999 to 2001.

As part of a more recent restructuring of the PRC’s banking sector, Central SAFE Investments Limited
(Huijin) made a capital contribution of US$15.0 billion to the Bank in April 2005, and the MOF
retained RMB124.0 billion of the Bank’s then existing capital. The Bank’s legal status changed from
a state-owned commercial bank to a joint-stock limited company on 28 October 2005.

Overview

The Bank is one of the largest commercial banks in the People’s Republic of China (PRC) in terms
of total assets, loans and deposits. As at 30 September 2010 and 30 June 2010, on an unaudited
consolidated basis: the Group’s total assets were, respectively, RMB13,417,887 million
(US$2,041,737 million) and RMB12,960,381 million (US$1,972,120 million); the Group’s issued
share capital was, in each case, RMB334,019 million (US$50,826 million); the Group’s advances to
customers, banks and other financial institutions were, respectively, RMB6,571,512 million
(US$999,956 million) and RMB6,354,384 2 million (US$966,917 million); and the Group’s customers
deposits were, respectively, RMB11,282,590 million (US$1,716,819 million) and RMB10,095,715
million (US$1,536,218 million). For the nine months ended 30 September 2010 and the six months
ended 30 June 2010, the Group’s operating profit before impairment losses was RMB182,267 million
(US$27,735 million) and RMB119,059 million (US$18,117 million), respectively, and the Group’s net
profit attributable to equity holders was and RMB127,216 million (US$19,358 million) and

2
    Note that net of allowance for impairment losses, these figures are RMB 6,202,394 million and RMB6,412,354, respectively.



                                                              89
RMB84,603 million (US$12,874 million), respectively. As at 30 September 2010 and 30 June 2010,
the Group’s core capital adequacy ratio was 9.33 per cent. and 9.41 per cent., respectively, and the
Group’s capital adequacy ratio was 11.57 per cent. and 11.34 per cent., respectively. Its market
capitalisation as at the Latest Practicable Date was HK$1,778,928 million (US$228,109 million).


As at 30 June 2010, the Bank had 388,032 employees under payroll. As at 30 June 2010, it provided
a wide range of financial products and services to 3.92 million corporate clients and 230 million
individual customers through 16,210 domestic institutions, 181 overseas institutions and a global
network of 1,424 correspondent banks as well as Internet Banking, Telephone Banking and
self-service banking.

The Bank is headquartered in Beijing and, as at 30 June 2010, had 24 operational branches in 22
countries and regions, 181 overseas branches and established correspondent bank relationships with
1,424 overseas banks in 128 countries and regions.

Since 1999, the Bank has implemented a series of reform measures that it believes have significantly
transformed its business, operations and corporate culture. In particular, it has focused on developing
comprehensive risk management systems and rationalising its business structure and organisation. The
Bank’s business focus and structure have evolved to meet its customers’ demand for a broad range of
banking products and services. It has focused on expanding its personal banking operations,
particularly in high-growth fee and commission-based segments, and has established itself as a leading
electronic banking service provider. Through significant investments in information technology, the
Bank has established centralised information systems designed to enable it to analyse the activities of
its customer base, target attractive client segments and enhance its risk management and other internal
control capabilities. The Bank believes that, as a result of its reforms, its business structure, processes,
corporate governance practices and internal controls are among the most advanced of PRC commercial
banks.

The Bank has also actively sought to accommodate the financial needs of the globalisation of its
customers. In this regard, it has been expanding its global service network, through among other
things, the purchase of 70 per cent. of the shares of Bank of East Asia Canadian unit in 2010, the
acquisition of 97.24 per cent. the shares in Thailand ACL Bank in 2010, the merger of Seng Heng Bank
and Macau Branch to form ICBC Macau in 2009, the opening of a Hanoi Branch in Vietnam in 2009,
the opening of its Abu Dhabi Branch in 2010, the establishment of a subsidiary bank in Malaysia in
2010 and the opening of five new European branches in France, Spain, Italy, Belgium and the
Netherlands in early 2011.

The Bank believes that “Industrial and Commercial Bank of the PRC” (              )” is one of the
most recognised financial services brands in the PRC. In 2009 and 2010, it was awarded:

•    “Best Bank in the PRC” by Global Finance;

•    “the PRC’s Most Promising Company in Banking & Finance” by The Asset;

•    “Banking Achievement of 2009” by Emerging Markets;

•    “the PRC’s Most Valuable Brand” by World Brand Lab;

•    “Best Investor Relations” by FinanceAsia;


                                                    90
•    “Best SME Financial Service” at the Fourth Annual Conference on the PRC’s E-Finance
     Development;

•    “Best Consumer Internet Bank in the PRC” by Global Finance;

•    “Achievement Award for Commitment to Investors in the PRC” by The Asian Banker;

•    the “Best Corporate Governance Disclosure Award 2009” by the Hong Kong Institute of Certified
     Public Accountants; and

•    “Global Most Powerful 100 Brands” in 2010, published by Millward Brown Optimor.

Singapore Branch

Background

Singapore’s well-developed financial sector, regulatory framework and infrastructure makes it an
attractive business hub in the Asia Pacific region. These factors have led many Chinese businesses to
use Singapore as a base for operations in the region. Singapore is also an important trade partner of
China and could emerge as a conduit for the rapidly expanding bilateral trade relationship between
India and China. The Bank sees its Singapore Branch as its business centre for this region.

Singapore Regulatory Guidelines

The Singapore Branch was established in 1993. It is one of the first of the Bank’s overseas branches.
The Singapore Branch was granted a Wholesale Banking Licence by the Monetary Authority of
Singapore (MAS) in 2003. The Singapore Branch is also subject to PRC regulations that are applicable
to the overseas branches of Chinese banks. For more details on regulations governing the Bank’s
overseas branches, see “Supervision and Regulation — Supervision and Regulation of the Bank’s
Overseas Operations”. Leveraging off the Bank’s strong capital and widespread offices network, and
Singapore’s strategic location in Asia and business environment as an international finance and
trading centre, the Singapore Branch has increased the range of products and services offered to
customers in Singapore and around the region for nearly two decades of operation.

The following are some key provisions of the guidelines applicable to wholesale banks in Singapore:

1.   A wholesale bank may transact any banking business with approved financial institutions.

2.   A wholesale bank may transact banking business with persons that are not approved financial
     institutions, subject to the following restrictions:

     (a)   it shall not operate savings accounts denominated in Singapore dollars, except with the
           prior approval of MAS;

     (b)   it may accept fixed deposits but, in respect of Singapore dollar fixed deposits, the initial
           deposit shall not be less than S$250,000 and the outstanding deposits (including interest)
           shall not be less than this sum at all times except on termination of the account or the
           withdrawal of all deposits standing to the credit of the depositor; and

     (c)   it may operate current accounts but, in respect of current accounts denominated in
           Singapore dollars where the customer is a natural person and a resident of Singapore, the
           current account shall not be interest-bearing, except with the prior approval of MAS.


                                                  91
3.   Subject to paragraph 4, a wholesale bank may issue, in Singapore, bonds and negotiable
     certificates of deposit, provided that:

     (a)   the bonds or negotiable certificates of deposit are to be denominated in foreign currency;
           or

     (b)   where the bonds or negotiable certificates of deposit are denominated in Singapore dollars,
           they shall:

           (i)    have an original maturity period of not less than 12 months;

           (ii)   be issued in a denomination of not less than S$200,000; or

           (iii) be issued to sophisticated investors or their nominees.

4.   Where paragraph 3(b)(iii) applies, and the bonds or negotiable certificates of deposit are issued
     in circumstances such that the wholesale bank reasonably expects or foresees that the bonds or
     negotiable certificates of deposit (as the case may be) will not be held at all times by persons
     who are sophisticated investors, there shall be contained in any prospectus and any profile
     statement in respect of its issue or, where such documents are not required in respect of its issue,
     an information memorandum to be issued, circulated or distributed in respect of its issue, the
     following additional information:

     (a)   a statement that the wholesale bank, as issuer of the bonds or negotiable certificates of
           deposit, is subject to restrictions on the acceptance of deposits in Singapore dollars;

     (b)   a statement that the bond or negotiable certificate of deposit does not constitute or evidence
           a debt repayable by the bank on demand to the holder of the bond or negotiable certificate
           of deposit (as the case may be);

     (c)   a statement of the terms and conditions under which the holder of the bond or negotiable
           certificate of deposit may recover the principal sum from the bank as issuer; and

     (d)   a statement that the value of the bond or negotiable certificate of deposit, if sold on the
           secondary market, is subject to market conditions prevailing at the time of the sale.

5.   A wholesale bank shall maintain only one place of business in Singapore.

6.   These guidelines are subject to any additional requirements that may be imposed, including in
     particular MAS Notice 757 (Lending of Singapore Dollar to Non-Resident Financial
     Institutions), and the Asian Currency Unit Terms and Conditions of Operation under Section 77
     of the Banking Act.

Further, under the Singapore Branch’s licence terms it shall operate within an approved ACU limit and
shall maintain a minimum overall net adjusted capital funds and, in the case of acceptance of foreign
currency deposits from non-bank Singapore residents, there is a minimum threshold requirement. The
Singapore Branch is also regulated under the Banking Act, Securities and Futures Act, Financial
Advisers Act and Companies Act.

Under the Asian Currency Unit Terms and Conditions of Operation, the unit may:

•    issue fixed rate and floating rate US$ NCDs after consultation with the MAS;

•    place deposits or extend loans and advances in any currency except Singapore dollars;


                                                   92
•    transact exchange business which does not involve Singapore dollars directly;

•    establish, open, advise or negotiate letters of credit provided that the letters of credit are not
     expressed in Singapore dollars;


•    issue or renew guarantees, indemnities or similar undertakings provided that such guarantees or
     indemnities are not expressed in Singapore dollars;

•    discount bills and acceptances provided that the bills or acceptances are not expressed in
     Singapore dollars;

•    act as manager, underwriter or as a member of a selling group for new issues of securities in any
     currency other than Singapore dollars;

•    transact, deal, undertake brokerage business and invest in securities in any currency except
     Singapore dollars;

•    manage investment funds denominated in any currency except Singapore dollars; and


•    provide advisory services relating to financial matters.


Business Activities

In Singapore, the Singapore Branch provides personal cash management for customers, RMB
fixed-rate remittances for Chinese people living in Singapore and financing services for its corporate
clients. The Bank was the first bank in Singapore to provide personal RMB fixed-rate remittance. This
service is well regarded for being safe and efficient and may be availed of to remit in SGD or USD.
Its financing services can fully meet the daily and project operating needs of bilateral and syndicate
borrowers through tailor-made financing plans based on their business nature and corporate strengths.


The Singapore Branch provides a range of products to its corporate clients including overdraft
facilities, revolving credit facility, short-term to long-term financing, syndicated financing,
ship/aircraft financing, project financing, banker’s guarantees, issuance of documentary credits,
shipping and airway guarantees, trust receipts, back-to-back letters of credit, pre-export finance,
export bills purchase, receivables financing, structured trade financing, forfeiting, letters of credit and
telegraphic transfer reimbursement refinancing.

The Bank believes that it offers its Chinese corporate clients in the PRC a springboard to venture into
the South-east Asian region. The Bank also provides a platform for Singapore companies entering into
the PRC market. In line with the above strategies, the Singapore Branch seeks continuously to
strengthen ICBC Bank’s relationship base in the Chinese community by providing a seamless
operation across the PRC and Singapore, within the framework of applicable regulations and banking
secrecy requirements.

As at 30 September 2010, the Singapore branch had 73 employees under payroll.




                                                    93
Organisation

The following chart sets out the Bank’s organisation structure as at 30 June 2010:


                                            General Manager



    AGM or DGM              AGM or DGM              AGM or DGM                          Gen.Admin
                                                                                        Dept.

        Corporate                  Credit Dept.              Bills Dept                 Internal Audit
        Banking
                                   Accounting/Set            Retail Banking
        Treasury Dept.             tlement Dept.             Dept

                                   IT Dept.
                                                            Orchid               China Town
                                                            Remittance           Remittance
                                   Compliance               Centre               Centre
                                   Dept


THE BANK’S COMPETITIVE STRENGTHS

The following are the Bank’s main competitive strengths:

•     It is one of the world’s most profitable commercial banks with the largest market capitalisation
      and customer deposits — From 2007 to 2009, the Bank had the largest market capitalisation
      among commercial banks in the world for three consecutive years. With steady earnings growth,
      the Bank has been the most profitable bank in the world for two consecutive years. “Industrial
      and Commercial Bank of China” has become one of the PRC’s best known brand names in the
      financial service industry, and its international influence is also expanding rapidly. The Bank is
      one of the most profitable large-scale commercial banks with the best growth profile in the
      world. Even under the difficult and unfavourable business environment during the global
      financial crisis in 2008 and the slowdown of economic growth in the PRC, the Bank was able to
      maintain a steady profit growth. It has also established strong market positions in numerous
      corporate banking, personal banking and treasury business lines. The Bank believes that its size
      and leading market position will enable it to continue to increase its penetration in key market
      segments, diversify its revenue streams and achieve attractive economies of scale.

•     The Bank has created a business structure that balances risk and benefits and has strong
      sustainability — The Bank has taken steps to optimise its asset and liability structure. With
      respect to assets, it has consistently improved return on loans, while maintaining a low
      proportion of risky assets. As at 30 June 2010, the Bank’s non-credit assets accounted for 52.1
      per cent. of its total assets, its loan-to-deposit ratio was 59.5 per cent. 3 and risk-weighted assets
      accounted for 51.68 per cent. of its total assets. With regard to liabilities, through the sale of
      wealth management products, the Bank has diverted from high-cost term deposits and generated
      income from transaction fees. Meanwhile, the proportion of low-cost demand deposit and
      interbank deposit continues to increase, resulting in a significant transformation of liabilities
      structure and a significant reduction in cost of capital. The Bank’s income structure has been
      optimised to develop low capital consumption intermediary businesses and emerging businesses


                                                    94
    with a more diversified, stable and balanced income structure. During the six months ended 30
    June 2010, the ratio of its non-interest income has increased from 12.8 per cent. of total
    operating income in 2007 to 20.8 per cent. of total operating income for the six months ended
    30 June 2010, and the ratio of its net fee and commission income has increased from 14.90 per
    cent. of total operating income in 2007 to 20.39 per cent. and 19.65 per cent. of total operating
    income in the six months ended 30 June 2010 and the nine months ended September 2010,
    respectively. The contribution of these types of income to the Bank’s total income has been
    increasing. Both the volume and pace of the growth of the Bank’s intermediary business continue
    to take the lead over its peers, and the Bank believes its strong market position in the market has
    been further established.

•   Extensive customer base — The Bank has the largest customer base among commercial banks in
    the PRC. As at 30 June 2010, it had approximately 3.92 million corporate customers and 230
    million individual customers. The number and contribution to its business of medium and
    high-end corporate and individual customers have continued growing, providing it with a strong
    platform for cross-selling of products and services as it seeks to continue to expand its product
    and service offerings in new areas, such as corporate cash management, investment banking,
    wealth management and other fee- and commission-based businesses.


•   Established, extensive and effective distribution channels and established electronic banking
    services — The Bank has a well-structured, extensive and efficient distribution network. As at
    30 June 2010, it had 16,210 domestic institutions, 181 overseas institutions and 1,424
    correspondent banks worldwide. Among its domestic institutions, 7,172 outlets were located in
    the developed areas with rich financial resources, including Yangtze River Delta, Pearl River
    Delta and Bohai Rim. To complement its extensive network, the Bank has an efficient and
    advanced electronic banking network, which includes internet, telephone, mobile phone, ATM
    and self-service banking centres. In addition, the Bank’s electronic banking network reduces its
    per-transaction cost, which contributes to lowering its overall cost-to-income ratio. The Bank’s
    extensive distribution network provides it with a strong sales platform, which enables it to
    establish strong market positions in new products and services such as bearer form treasury
    bonds, open-end fund and bancassurance products, increase customer convenience, satisfaction
    and loyalty, and source new customers more effectively.


•   The Bank has comprehensive and effective risk management and internal controls managed by
    an advanced information technology system — The Bank has built a leading risk management
    information system in PRC, which is centralised, refined, streamlined, quantitative and with
    good control. The system covers the entire process of risk management and achieves real-time
    monitoring on credit asset quality and changes in operational status, as well as the identification
    and real-time control on market risk and operational risk. The Bank’s integrated centralised
    credit and risk management systems have enabled it to accurately identify, monitor and assess
    its customers’ credit profiles according to set parameters such as product segment. This is a
    valuable tool for the Bank in evaluating the risks involved in any particular customer or customer
    segment, in building its customer base according to acceptable ratings criteria, and in managing
    its portfolio risks according to its own risk appetite. Utilising its extensive branch network and
    the potential synergies across different market segments, the Bank is also able to identify
    high-performing geographic and market sectors with low defaults on loans, and determine




                                                 95
     strategies to target such sectors, based on the information gleaned from its systems. Through its
     industry-leading risk management capability, the Bank has maintained a low NPL ratio in terms
     of newly issued loans and has achieved a decrease in both NPL balance and NPL ratio for 10
     consecutive years.


•    Stable and Experienced Management Team — The Bank’s senior management team has extensive
     industry and leadership experience in the PRC’s commercial banking industry. Its chairman, Mr.
     Jiang Jianqing, who joined the Bank in 1984, has worked in the banking industry for more than
     31 years. The Bank’s president, Mr. Yang Kaisheng, who joined in 1985, has worked in the
     banking industry for more than 25 years. The Bank’s senior management team has a track record
     of successfully implementing innovative and industry-leading business initiatives, including the
     early and significant investment in its information technology, the early focus on risk
     management and internal controls, the reforms to its branch network and business processes, and
     the conversion of the Bank into a joint-stock limited company. The Bank believes this successful
     track record demonstrates its senior management’s strategic vision, proactive approach in
     adapting to the changing market environment and ability to lead a modern commercial bank of
     its size. The proven ability of the Bank’s management to provide strategic direction, execute
     business initiatives and compete in a highly competitive market is best evidenced by the Bank’s
     solid position in the PRC banking sector and its steady profit growth despite the recent global
     financial crisis.

STRATEGY

The Bank aims to strengthen its market position in the PRC’s banking industry and focus on
transforming itself into a world-class financial institution. Its overall goal is to maximise shareholder
value and achieve sustainable growth. The Bank led the market in investing in centralised information
technology, introducing new products and services, establishing comprehensive risk management
systems and developing electronic banking networks. The Bank intends to continue this innovative
approach and differentiate itself through the following strategies:

•    Continue to optimise asset and liability structure — The Bank aims to optimise its business
     structure by focusing its credit structure and new growth areas of its business including
     individual loans, loans to small and medium enterprises and trade finance to develop its large,
     medium and small customers and the traditional and emerging markets. With regard to liabilities,
     the Bank has focused on the sale of wealth management products in order to divert from
     high-cost term deposits and generate income from transaction fees. It has also focused on
     low-cost demand deposit and interbank deposit in order to optimise its liability structure and
     achieve reductions in the cost of capital. In order to optimise its income structure the Bank aims
     to continue to focus on low capital consumption intermediary businesses (namely settlement,
     clearing and cash management, personal wealth management and private banking, investment
     banking and bank cards, and emerging businesses) in order to diversify its business and achieve
     a more stable and balanced income structure.

•    Diversify Revenue and Asset Mix by Expanding into Higher Growth Non-Credit Businesses —
     The Bank plans to diversify its revenue sources by continuing to develop its non-credit
     businesses. The Bank believes that many fee- and commission-based products and services will
     experience strong growth over the next few years as the PRC’s economy continues to grow, the
     financial services sector in the PRC further liberalises and its customers’ banking needs become
     more sophisticated.


                                                   96
    In corporate banking, the Bank plans to focus its team of customer relationship managers on
    important customers by size, expanding the range of products and service offerings including
    insurance brokerage, asset custody, cash management, bank cards and payroll services to
    insurance companies. It will also continue to improve the synergies between its corporate
    banking and investment banking businesses.

    In personal banking, the Bank plans to transition client deposits into personal wealth
    management and other investment products, standardising services and distribution bankwide to
    provide tailored products and services focused on wealthy customers and customer groups with
    high-growth potential.

    In its treasury business, the Bank plans to enhance its investment and trading capabilities,
    upgrade its trading systems, improve the skills of investment and trading personnel, develop new
    products and services, strengthen its liquidity management and increase the return on its
    non-credit assets.

    The Bank believes that by offering a broader range of non-credit products and services, it will
    not only improve customer satisfaction and attract new customers, but also create attractive new
    revenue sources and improve its overall profitability.

•   Strategically Expand Traditional Branch Network and Enhance Sales and Marketing
    Capabilities through Strengthening Electronic Banking Operations — To further enhance the
    marketing of its products and services and achieve greater operational efficiencies, the Bank
    intends to fully leverage its advanced information technology platform and customer relationship
    management systems. Building on its extensive distribution network, the Bank is selectively
    expanding its branch network in three economically developed regions, the Yangtze River Delta,
    Pearl River Delta and Bohai Rim regions. In addition, to take advantage of the rapid growth in
    foreign trade and better serve its multinational clients, the Bank intends to further expand its
    network by establishing additional overseas branches and outlets. The Bank also intends to
    utilise its extensive network to actively cross-sell its products and services to its existing
    customers. The Bank plans to expand its electronic banking operations through the installation
    of additional ATMs and the upgrading of its technology platforms for telephone and online
    banking services to deliver more products and services to its customers in a timely, reliable and
    convenient manner and to further increase revenue derived through its electronic banking
    platform.

•   Continue to maintain investments in information technology infrastructure to support its growing
    business — The Bank continually aims to maintain and develop an effective information
    technology system in order to maintain high standards and achieve effective customer service,
    product innovation, risk management, operation process re-engineering and electronic banking
    network expansion.

•   Continue to Strengthen Risk Management and Internal Control Capabilities — The Bank
    believes active risk management is an essential component of its overall business strategy. The
    Bank plans to continue to align its risk management and internal control capabilities with
    international best practices. The Bank continues to implement enhanced risk management
    procedures for all credit exposures, such as improving its risk warning and early identification
    and prevention capabilities. It is also instituting changes to further strengthen the independence
    of the internal control functions and improve its bank-wide internal control systems. As a
    complement to its improved risk management capabilities, the Bank seeks to continue to enhance
    asset and liability management capabilities and further centralise its risk management.


                                                 97
•       Enhance Employee Performance through Performance-linked Incentive Schemes and Continuous
        Training and Development — The Bank will continue to develop its human resources through
        various initiatives in order to support its business strategies. The Bank has introduced four career
        tracks into its human resource system, namely, “managerial,” “professional,” “sales and
        marketing” and “operational”, in order to facilitate employee career development and enhance
        performance appraisal and remuneration measures. The Bank intends to continue to provide
        training and development programmes (including those arranged with its overseas strategic
        investors) for its employees, to enhance their skills and professional development. It also intends
        to further improve its management and employee incentive system, including adopting an
        economic value-added (EVA)-based incentive scheme, such that employee income is tied to its
        employees’ personal performance and the contribution made by their respective work units. The
        Bank believes that through these initiatives it can attract, retain, motivate and develop a high
        quality workforce.

BUSINESS AND OPERATION

The Bank’s principal businesses include corporate banking, personal banking and treasury operations.
The following table shows operating income of various business divisions of the Group in the period
specified.

                                      Six months ended                           Year ended                   Year ended             Year ended
                                          30 June 2010                     31 December 2009                31 December 2008       31 December 2007

                                 Amount     Amount                    Amount      Amount
Items                            (RMB)      (USD)      Percentage     (RMB)       (USD)      Percentage Amount Percentage Amount Percentage

                                                          (%)                                  (%)                    (%)                    (%)
Corporate banking . . . .          93,933     14,293         51.9      166,157      25,283        53.7     153,068         49.3   127,636         49.6
Personal banking . . . . .         56,745      8,635         31.4       93,114      14,169        30.1     106,301         34.3    86,174         33.5
Treasury operations . . . .        29,317      4,461         16.2       48,727       7,415        15.7      49,927         16.1    41,432         16.1
Others (1) . . . . . . . . . .       933        142             0.5      1,413        215            0.5       899          0.3     2,186          0.8

Total operating income .          180,928     27,531        100.0      309,411      47,082       100.0     310,195     100.0      257,428     100.0



Note:


(1)     This represents the income and expenses that are not directly attributable or cannot be allocated to a segment on a
        reasonable basis.


Corporate Banking Business

Customer Base

The Bank possesses the broadest corporate customer base in the PRC. It provides a series of corporate
banking products and services to state-owned enterprises, privately owned enterprises,
foreign-invested enterprises, government authorities and other entities. As at 30 June 2010, the Bank
had 3.92 million corporate customers, of which 94,000 corporate customers maintained a financing
balance with it.

Operational measures

During the six months ended 30 June 2010, the Bank took advantage of favourable economic
conditions in the PRC to accelerate the restructuring of its operations and to develop its corporate
banking business. The Bank has improved the development mode for its credit business, optimised and
adjusted its credit structure and maintained stable growth in its credit business. The Bank has
developed its investment banking business, including investment and financing consulting,


                                                                           98
underwriting of debt financing instruments and management of syndicated loan arrangements,
promoted emerging businesses, including cash management, asset custody, corporate wealth
management and cross-border Renminbi settlement. The Bank has implemented and developed the
“Going Global” strategy for its operations. It has also enhanced its diversified marketing strategies to
explore customers’ business potential and increase the total return on customers. The Bank has
promoted the reform of the multi-tiered customer marketing system, enhanced the marketing level for
large customers with high quality, enhanced the individualised service capability in relation to
different types of customers, and promoted the coordinated development of small, medium and large
customers and expanded its customer base. With a people-oriented philosophy, the Bank has built up
a team of corporate customer managers and improved its employees’ marketing and service capability.

Market position and awards


By the end of 30 June 2010, according to statistics from PBOC, the Bank ranked first in the banking
industry in terms of corporate loans and corporate deposits, with a market share of 12.3 per cent. and
13.5 per cent., respectively.

During the six months ended 30 June of 2010, the Bank has continuously promoted the development
of its corporate banking business, improved the product and service system and improved its
marketing practice and customer service capability towards corporate customers. These efforts have
been widely recognised. The Bank was awarded the “Best Corporate Bank in China” by the Financial
Times (UK), the “Best Corporate Lending Bank in China” by the Global Finance and the “Top 10 SME
Financial Services Providers in China” by the Financial Times.

Introduction of products and services


The Bank’s corporate banking products and services include loan business, bill discount business,
deposit business together with the intermediary businesses including settlement and clearing, cash
management, authorised agency services, foreign exchange services, guarantee services, custodian and
investment banking services.

Corporate loans


Corporate loans represent the largest portion in the Bank’s loan portfolio. For ease of reference,
“corporate loans” in this offering circular does not include corporate loans made in the Bank’s
overseas businesses. As at 30 June 2010 and 30 September 2010, the balance of the corporate loans
amounted to RMB4,384,464 million and RMB4,547,045 million (US$691,903), respectively,
accounting for 69.0 and 69.2 per cent. of the Bank’s total loans, respectively. Corporate loans achieved
steady growth, with a compound annual growth rate (CAGR) of 16.5 per cent. from the end of 2007
to the end of 2009.

According to statistics from PBOC, as at 30 June 2010, the market share of the Bank’s corporate loans
was 12.3 per cent. and continued to rank first. In 2009, the Bank won the “Best Performed Syndicate
Loans” from China Banking Association. In 2008, it was awarded the “Best Corporate Lending Bank
in China” by Global Finance.

The Bank’s corporate loans include short-term loans and medium- to long-term loans.




                                                  99
Short-term loans

The Bank provides short-term loans due within one year to corporate customers, which mainly include
working capital loans (including trade finance loans), bills prepayment and purchase, factoring and
forfeiting. As at 30 June 2010, the balance of the Bank’s short-term loans amounted to RMB1275.7
billion (US$194.1 billion), accounting for 29.1 per cent. of its corporate loans. Its short-term loans
increased from RMB1,126.9 billion (US$171.5) at the end of 2007 to RMB1,190.4 billion (US$181.1)
at the end of 2009, with a CAGR of 2.8 per cent.

Mid-to-long term loans

The term of the Bank’s mid-to-long term loans generally ranges from one year to 10 years, mainly
including project loans, property loans, and syndicated loans. As at 30 June 2010, the balance of the
Bank’s mid-to-long term loans amounted to RMB3,108.8 billion (US$473.1 billion), accounting for
70.9 per cent. of corporate loans, in which the balance of project loans amounted to RMB2,094.9
billion (US$318.8 billion), the balance of property loans amounted to RMB524.8 billion (US$79.9
billion), and the balance of syndicated loans amounted to RMB306.0 billion (US$46.6 billion). The
Bank’s mid-to-long term loans increased from RMB1,7881 billion at the end of 2007 to RMB2,767.4
billion (US$421.1 billion) at the end of 2009, with a CAGR of 24.4 per cent.

Corporate Deposits

The Bank provides corporate clients with multiple interest-bearing demand and time deposit services
in RMB and major foreign currencies. Corporate deposits constitute a major source of funds for the
Bank. As at 30 June 2010, the Bank’s domestic branches had a balance of corporate deposits of
RMB5,362.9 billion (US$816.0), with a market share of 13.5 per cent., and continued to maintain its
strong position in the market. Demand deposits accounted for 64.3 per cent. of total domestic
corporate deposits.

From the end of 2007 to the end of 2009, the Bank’s corporate deposits grew by a CAGR of 18.6 per
cent., which is mainly attributable to the following targeted measures adopted by it to expand
corporate deposits:

it took advantage of favourable opportunities created by a rapidly growing macro economy to grow
its business, strengthened marketing efforts and product innovation and increased its products and
service offering to its corporate deposit clients;

it utilised credit resources, capital strength and settlement advantages and competed for clients with
diversified financial service needs; and

it developed cash management, asset custody, enterprise annuity fund, agency, wealth management
and other businesses and explored clients’ deposit potential.

Small and Medium Enterprise Business

The Bank regarded the development of small and medium enterprise (SME) banking business as an
important strategy and it has grown its SME business, enhanced the specialised operation of small
enterprise business, developed its SME banking products, service channels and business processes and
improved the level of its financial services. As at 30 June 2010, the Bank had a total of 54,000 small
enterprise customers who had loan balances with it, and such loan balance (excluding discounted bills)
was RMB390.9 billion (US$59.5 billion).


                                                 100
In 2009, the Bank was awarded the “Top 10 SME Financial Services Providers in China” by the
Financial Times and the “Top 10 Commercial Banks Supporting the Development of SMEs” by the
Organising Committee of the Annual Affair of China’s Small and Medium Entrepreneurs. In 2008, the
CBRC named the Bank as “Model Unit Providing Financial Services for SMEs in 2007”.


Institutional Banking

Bancassurance business — The Bank continued to consolidate business cooperation in bancassurance,
actively promoted service innovation in bancassurance business, expanded the scope of cooperation
in bancassurance business and consolidated the cooperation with insurance companies in various
business fields such as deposit, insurance brokerage, asset custody, cash management and bank cards.
For the six months ended 30 June 2010, the Bank’s bancassurance business income was RMB2,205
million (US$336 million) with a growth of 38 per cent. compared to the same period in 2009.

Bank-securities business — The Bank has actively explored the bank-securities business and has
achieved relatively rapid growth in third-party depository service. Its base of third-party depository
customers has grown steadily and it has maintained its strong market position in terms of increase in
number of new customers in the banking industry. As at 30 June 2010, the number of brokers in
cooperation with the Bank providing third-party depository service reached 100 and the number of
clients using the third-party depository service reached 19.05 million.

Inter-bank business — The Bank has actively expanded the scope of inter-bank cooperation and
promoted its inter-bank business platform. As at 30 June 2010, the number of its domestic
correspondent banks amounted to 106.

Bank-government business — The Bank has been constantly monitoring the bank-government service
system to improve its capacity of serving government agency clients. It has initiated an “On-line
Taxation Service Platform” to provide a one-stop service platform for taxpayers and has reinforced the
business processing capability of its “Bank-Customs Link” system, and promoted the function of
guarantee over online payment of taxes. It was one of the first among commercial banks to operate
a “Central Budget Entities’ Business Card Support System” and launched the integrated social security
service system.

Bank-futures business — The Bank took advantage of the opportunity of the launch of stock index
futures to increase the number of margin deposit accounts opened with it by various investors,
enhanced the scale of margin deposits and further strengthened its market position in the bank-futures
business.

Discounted Bills

In its discounted bills business, depending on the nature of the accepting institutions, discounted bills
can be divided into commercial acceptance bills or bank acceptance bills. As at 30 June 2010 and 30
September 2010, the balance of the Bank’s domestic discounted bills was RMB193,900 million
(US$29,505) and RMB134,215 million (US$20,423), respectively.

During the six months ended 30 June 2010, in line with macro economic changes, its credit extension,
demand of the credit market and interest trends of the bills market, the Bank adjusted the scale of the
discounted bills business in a timely manner to balance the extension of credit and achieve earnings
targets.


                                                  101
Settlement and Cash Management Service

The Bank provides its clients with domestic clearing and settlement services, and at the same time
provides large companies and their subsidiaries with comprehensive services such as centralised cash
management and transfer. As at 30 June 2010, the Bank had a total of 4.78 million corporate settlement
accounts and approximately 443,000 cash management clients. In the six months ended 30 June 2010,
the amount of settlement for the Bank’s corporate customers amounted to RMB784 trillion (US$119
trillion), thus maintaining its largest market share in the PRC.

During the six months ended 30 June 2010, the Bank developed clearing services, settlement and cash
management services and continued to strengthen product innovation and branding.

The Bank was awarded “Best Cash Management Bank in China” by The Asset and Finance Asia for
four consecutive years, was rated by Asia Money as “Best RMB Cash Management Services in China”
and was awarded “Achievement Award for Cash Management in China” by The Asian Banker.

Investment Banking

The Bank’s investment banking business mainly includes regular financial advisory service, enterprise
credit service, investment and financing advisory service, syndicated loan arrangement and
management service, corporate assets and debt restructuring services, corporate acquisition and
merger service, asset securitisation or quasi asset securitisation service, service of credit capital
transfer and trading, underwriting of corporate debt financing instruments such as commercial paper,
medium-term note and financial bonds, direct investment advisory service, financial advisory service
for corporate issuance of equities and bonds and service for equity investment funds.

During the first nine-month reporting period of 2010, the Bank took advantage of capital market
opportunities to accelerate restructuring of investment banking business structure and branding.

During the six months ended 30 June 2010, the income from the Bank’s investment banking business
recorded strong growth and the investment banking business brand has gained more prominence. In
2007, 2008 and 2009, the total amount of debt financing instruments underwritten by the Bank reached
RMB79.9 billion (US$12.2 billion), RMB150.7 billion (US$22.9 billion) and RMB285.8 billion
(US$43.5 billion), respectively, ranking first in the “Ranking of Local Investment Bank for Bond
Underwriting in China” by Bloomberg for three consecutive years. In 2009, revenue generated by
investment banking business reached RMB12.5 billion (US$1.9 billion), winning the Bank the
honorary title of “Best Investment Bank in China” from Securities Times. In the six months ended 30
June 2010, income from investment banking amounted to RMB8,666 million (US$1,319 million),
representing an increase of 21.3 per cent. over the same period the previous year.

International Settlement and Trade Finance

International settlement and trade finance business is one of the Bank’s key development priorities.
Its domestic branches processed an aggregate amount of USD545.9 billion international settlement in
2009 and USD351.6 billion in the six months ended 30 June 2010. In 2009, the Bank’s domestic
branches extended a total trade finance amount of RMB679.7 billion (US$103.4 billion), representing
an increase of 203.9 per cent. as compared to 2007, of which domestic trade finance accounted for
RMB374.4 billion (US$57.0 billion), representing an increase of 898.8 per cent. as compared to 2007,
international trade finance accounted for USD44.7 billion, representing an increase of 75.4 per cent.
as compared to 2007. In the six months ended 30 June 2010, domestic branches disbursed an aggregate
of RMB415.8 billion (US$63.3 billion) in trade finance, an increase of 44.9 per cent. over the same
period the previous year, of which domestic trade finance increased by 83.3 per cent. over the same
period the previous year to RMB275.0 billion (US$41.8 billion).


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Asset Management

Asset custody business

The Bank provides an array of custody services to securities investment funds, enterprise annuity,
National Council for Social Security Fund, insurance companies, commercial banks, qualified foreign
institutional investors (QFIIs), qualified domestic institutional investors (QDIIs) and other bank
clients, including assets custody, capital clearing, accounting, transaction monitoring, performance
appraisal and reporting services.

During the six months ended 30 June 2010, the Bank took advantage of opportunities in the capital
markets, made timely adjustment to its business development strategies, accelerated market expansion
and technology innovation and achieved fast growth in its assets custody business.

As at 30 June 2010, the Bank had RMB2,071.3 billion (US$315.2 billion) of total net value of assets
under custody, ranking first in the PRC industry for 12 consecutive years. It was awarded “Best
Custodian Bank in the PRC” by domestic and overseas financial media, including the Global
Custodian, The Assets and Global Finance. The Bank has so far won more than 20 awards for its
custody services.

Pension Services

The Bank is among the first batch of banks to be qualified as bookrunner and custodian for enterprise
annuity since 2005, and as an entrusted legal person for enterprise annuity in 2007. In recent years,
while it was developing its enterprise annuity business, the Bank actively provided services to the
personal account of basic pension funds and other pension funds. As at 30 June 2010, the Bank had
provided pension services to 21,375 enterprises, managed RMB40.7 billion (US$6.2 billion) of
various pension funds, 7.90 million personal pension accounts and pension funds, with custody
amounting to RMB136.1 billion (US$20.7 billion).

During the six months ended 30 June 2010, the Bank took advantage of its full set of business
qualifications, extensive service network and advanced IT system to promote and grow its pension
businesses.

Precious Metal Business

The Bank operated four product lines of precious metal business: physical bullion, trading, precious
metals linked financing and wealth management. It continuously monitors to improve its product
innovation ability and service capacity. In 2009, the volume of precious metal transactions that the
Bank carried out on a proprietary basis or on behalf of customers reached 992 tonnes, of which
personal account bullion transactions reached 722 tonnes, maintaining the Bank’s strong market
position in the industry. The Bank cleared RMB183.5 billion (US$27.9 billion) on behalf of Shanghai
Gold Exchange, maintaining its strong market position in the industry. In the six months ended 30 June
2010, the volume of precious metal transactions reached 1,559 tonnes, of which precious metal
transactions under accounts reached 380 tonnes. The Bank cleared RMB58.1 billion (US$8.8 billion)
on behalf of the Shanghai Gold Exchange.

Corporate Wealth Management

In 2009, cumulative sales of the Bank’s corporate wealth management products reached RMB1,795.1
billion (US$273.2 billion). In the six months ended 30 June 2010, sales of its corporate wealth


                                                 103
management products reached RMB1222.5 billion (US$186.0 million) in aggregate. In the appraisal
activity “2007 List of China’s Best Bank Wealth Management Products” organised by MoneyWeek,
five of the Bank’s wealth management products were included on the list. The Bank was consecutively
awarded the “Best Asset Management Team” by 21st Century Business Herald in 2009 and 2010.


During the six months ended 30 June 2010, the Bank adjusted product investment direction in response
to changes in market needs and regulatory requirements, enhanced innovation in wealth management
products, improved its investment management capability and strengthened its position in the banking
industry. Also, by leveraging off its strong research and development ability, the Bank intensified its
efforts in product innovation, improved its ultra-short-term product line, and introduced a number of
non-fixed-term and fixed-term (seven days, 14 days and 28 days) rolling ultra-short-term products. It
also introduced an array of wealth management products including stock investment cash options and
preferred beneficiary rights in real estate investment fund trust scheme. Marketing efforts were
intensified to increase the brand influence of “ICBC Wealth Management”. Leveraging its advantages
in physical outlets and electronic banking network, the Bank implemented multi-business-line
interactive marketing to drive the rapid growth in sales of wealth management products.

Personal Banking

Client Base

The Bank has a solid personal client base in the PRC. As at 30 June 2010, it had 230 million personal
clients, of which 26.50 million were mid-to-high end.

Operational Measures

Focusing on the overall target of “Building the No. 1 Retail Bank in the PRC”, the Bank improved its
customer-oriented operation management system, implemented process reengineering for personal
banking service, improved its business processing procedures, increased the level of specialisation and
improved its personal banking operation and management system in order to increase efficiency.

Market Position and Awards

According to statistics from PBOC, as at 30 June 2010, the Bank was ranked first in terms of the
balance of personal loans and personal deposits, with a market share of 14.4 per cent. and 17.4 per
cent. respectively. It also maintained a strong market position among its peers in other personal
banking businesses.

The Bank is well recognised in the market for its excellent personal banking services and was awarded
“Best Retail Bank in China”, “Best Mega Retail Bank in China” and “Best Multi-channel Bank in
China” by The Asian Banker during the six months ended 30 June 2010. In 2008, the Bank’s “Money
Link Express” product was awarded “Wealth Management Product with the Most Investment Value in
2008” by Hexun.com. Its wealth management product, related to Junding Winery’s Red Wine Earnings
Right Trust, was awarded “2008 Best Designed and Innovated Wealth Management Product” by Jin
Rong Jie (Financial Industry). In 2009, the Bank was awarded “Best Team for Investment and
Management of the Year” by MoneyWeek. In addition, the Bank has won “Best Bank Wealth
Management Product of the Year” for its “Zhonghai Lvcheng Real Estate Investment Fund Trust
Scheme” and “Best Wealth Management Series Product for Innovative Marketing” for its “Wen De Li”
product.


                                                 104
Introduction of Products and Services

The Bank’s personal banking products and services include personal loans, personal deposits, bank
cards, personal wealth management and others. During the six months ended 30 June 2010, its
personal banking has continued to maintain its strong market position in the industry, and its market
influence continues to increase. For example:

its personal loans business ranked first in terms of market share;

its personal deposits business ranked first in terms of market share;

its credit cards business ranked first in terms of market share; and

its wealth management business had a strong market position in the industry. Elite Club Account,
wealth management, private banking and other wealth management businesses targeting mid-to-high
end clients have achieved a fast growth rate and increasing market influence.

Personal Loans

Loans provided by the Bank to personal customers include personal housing loans, personal
consumption loans, personal business loans and credit card overdrafts. For ease of reference, the
“Personal loans” in this offering circular does not include loans made in the Bank’s overseas business.
As at 30 June 2010 and 30 September 2010, the balance of the Bank’s domestic personal loans
amounted to RMB1,457,898 million (US$221,842 million) and RMB1,550,095 million (US$235,871
million), respectively.

Personal housing loans are an important component of the Bank’s personal loan portfolio. As at 30
June 2010, the balance of its domestic personal housing loans amounted to RMB1,037.8 billion
(US$157.9 billion), accounting for 71.2 per cent. of the balance of personal loans.

The Bank’s personal consumption loans include personal auto loans, personal comprehensive
consumption loans, personal student loans, personal pledged loans and personal unsecured loans. As
at 30 June 2010, the balance of its domestic personal consumption loans amounted to RMB209.7
billion (US$31.9 billion), accounting for 14.4 per cent. of the balance of personal loans.

As at 30 June 2010, the balance of the Bank’s personal business loans and credit card overdrafts
amounted to RMB158.6 billion (US$24.1 billion) and RMB51.9 billion (US$7.9 billion), accounting
for 10.9 per cent. and 3.5 per cent. of the balance of its personal loans, respectively.

Personal loans is the major development direction for the Bank’s personal banking business. During
the six months ended 30 June 2010, it took advantage of the opportunities arising from the State’s
efforts to stimulate consumption by residents and expand domestic demand, and increased its capacity
to meet demands for personal loans. The Bank continued to improve marketing and product innovation
as well as promoting the development of personal loans.

Personal Deposits

The Bank provides demand deposits and term deposits in RMB and foreign currencies. As at 30 June
2010, the balance of its domestic personal deposits amounted to RMB5,093.0 billion (US$775.0
billion), of which demand deposits accounted for 40.3 per cent.

During the six months ended 30 June 2010, the Bank adopted various measures to promote the
development of personal deposits business and expand its fund sources.


                                                 105
Bank Cards Business

The Bank offers a full range of bank card products and services to personal customers, including
single currency and dual currency credit cards and single currency and dual currency debit cards. The
brand “Peony Card” adopted by its bank cards is among the most well-known bank card brands in the
PRC. As at 30 June 2010, the Bank had issued 320 million bank cards, representing an increase of
52.38 per cent. compared to the end of 2007. During the year of 2009, the Bank’s bank card business
generated revenue of RMB9.408 billion (US$1.432 billion), with a CAGR of 32.3 per cent. from 2007
to 2009. In the six months ended 30 June 2010, income from bank card business reached RMB6.186
billion (US$0.941 billion). During the six months ended 30 June 2010, major statistics of the Bank’s
bank cards were as follows:

                                                        As at the end As at the end As at the end As at the end
                                                        of June 2010     of 2009       of 2008       of 2007

Number of bank cards issued (millions) . .                    322.81        289.10        238.32        210.12
Debit cards (millions) . . . . . . . . . . . . . . .          263.96        237.09        199.27        186.74
Credit cards (millions) . . . . . . . . . . . . . . .          58.85         52.01         39.05         23.38

                                                         January -
                                                         June 2010        2009          2008          2007

Consumption value (in RMB billions) . . .                      947.5       1,497.9         796.4         616.2
Income from bank card business
  (in RMB billions) . . . . . . . . . . . . . . . . .             6.2            9.4           7.2           5.4

The Bank is one of the founding members of China UnionPay (a bank card organisation headquartered
in the PRC). Its bank cards are generally accepted by its own domestic network as well as China
UnionPay networks in the PRC and a number of other countries. The Bank’s dual currency credit cards
and dual currency debit cards can also be accepted by the networks of American Express, MasterCard,
and Visa. Meanwhile, the Bank has extensively developed its own service network, including a
24-hour call centre, branch outlet, electronic banking network, and mobile banking services, which
has also supported its bank card service.

Credit Card

With the issuance of RMB credit cards and dual currency credit cards in RMB-USD, RMB-Euro and
RMB-HKD, the Bank is the commercial bank with the largest number of credit cards issued, largest
transaction volume of credit card consumption and largest balance of overdrafts in the PRC. It holds
a strong market position in terms of the number of cards issued, card consumption amount and balance
of overdrafts. As at 30 June 2010, 58.85 million credit cards were issued, with RMB51.9 billion in
overdraft balance of domestic credit cards. During the year of 2009, the consumption amount of the
Bank’s credit cards reached RMB449.0 billion (US$68.3 billion), realising a CAGR of 66.5 per cent.
from 2007 to 2009.

During the six months ended 30 June 2010, the Bank maintained the strategy of “scale, upgrade,
globalisation and specialisation” for the development of its credit card business, and adopted various
measures to maintain its strong market position in the credit card business.

In 2009, the Bank was recognised as the “Trusted Brand — Credit Card Issuing Bank” by the Reader’s
Digest of the United States, was awarded “Best Market Promotion in Business Cards” by American
Express, and received the title of “Best Platinum Card” from MasterCard Worldwide. In 2008, it was
awarded “Credit Card Advanced Technology Award” by Visa International and “Best Product
Innovation Award” by MasterCard Worldwide.


                                                            106
Debit Card

The Bank has issued RMB debit cards and dual currency debit cards, such as RMB-USD debit cards,
to its customers. As at 30 June 2010, 260 million debit cards had been issued. During the year of 2009,
the consumption value of debit cards amounted to RMB1,048.9 billion (US$159.6 billion), with a
CAGR of 51.9 per cent. from 2007 to 2009.

Personal Wealth Management Business

The Bank offers a series of personal wealth management products and services, including financial
advisory services, investment management products and bancassurance services, as well as entrusted
agency services. In 2009, the total domestic sales of its various personal wealth management products
amounted to RMB1,527.8 billion (US$232.5 billion), of which total sales of personal banking wealth
management products amounted to RMB887.2 billion (US$135.0 billion), the Bank maintaining a
strong market position in the industry. Sales of commissioned open-ended funds reached RMB487.8
billion (US$74.2 billion), and sales of commissioned personal insurance reached RMB72.4 billion
(US$11.0 billion). The sales volume of these two products maintained a strong market position in the
banking industry. Sales of government bonds reached RMB80.4 billion (US$12.2 billion), which
consistently ranks first in the banking industry.

During the six months ended 30 June 2010, the Bank had timely adjusted its product strategy in line
with market changes, and introduced innovation in products and services according to the focus of the
market and needs, strengthening its market position in the personal wealth management market.

Elite Club Account

Elite Club Account is a personal banking brand designed by the Bank for mid- to highend customers
and has shown stable improvement in the Bank’s coverage and market influence.

The Bank has adopted several measures to drive the rapid growth of its Elite Club Account business.

As at 30 June 2010, the number of its Elite Club Account clients was 8.12 million, representing a
168.54 per cent. increase comparing to the end of 2007. In 2009, the Elite Club Account was awarded
“The Best Brand for Retail Finance of the Year” by China Business News.

Wealth Management Business

The Bank has promoted its wealth management business and provided personalised expert financial
wealth management services, such as wealth management consulting and asset management, to
wealthy clients with personal financial assets from RMB1 million to RMB8 million (US$0.152
million) to (US$1 million). As at 30 June 2010, the number of the Bank’s wealth management clients
reached 560,000.

During the six months ended 30 June 2010, the Bank developed service channels specifically designed
for wealth management customers. As at 30 June 2010, it had already established 167 wealth
management centres, accelerated product development and innovation, launched several wealth
management products under the brand “ICBC Wealth” and cooperated with fund companies to launch
“one-to-multiple” fund accounts for wealth management customers, and focused on branding. The
Brand “ICBC Wealth” has achieved considerable market influence.

In 2009, the Bank was awarded “Best Wealth Management Institution — The Most Reliable Wealth
Management Institution” by Money Talks.


                                                 107
Private Banking Business

The Bank provides high net worth clients (with personal financial assets of more than RMB8 million
(US$1 million)) with private banking services, focusing on asset management and consulting services,
and with four major functions of “creating wealth, managing wealth, protecting wealth and passing on
wealth”.

As at 30 June 2010, the number of the Bank’s private banking clients was approximately 16,400. In
2009, the Bank was awarded by the 21st Century Business Herald “Excellent Private Banking Team
of the Year”. In 2010, it was awarded “Best Bank for Private Banking — Fixed-Income Products
Related Asset Management in China” by Euromoney.


Treasury Operations

Operational Activities

The Bank takes strategic priority in developing treasury operations to be more efficient in its
operations and to improve its competitiveness in the future. It accelerates the development of various
financial tools and explores business potential, in order to enhance its operation capability in both
domestic and foreign currencies across domestic and overseas financial markets.


During the six months ended 30 June 2010, the international financial market was heavily impacted
by the global financial crisis. The Chinese government has adopted a proactive fiscal policy and
moderately loose monetary policy, which have successfully promoted the recovery of the PRC’s
economy. In the new economic and financial environment, the Bank studied and analysed market
changes and economic trends and proactively conducted product innovation and prudent evaluation.
It also sought the proper allocation of returns and risks of treasury operations, made timely adjustment
to its investment and trading strategies, further strengthened treasury operation and prevented business
risks in order to achieve a balanced growth of asset scale and returns.


Market Position and Awards

The Bank’s treasury operations have a strong market position in the domestic banking industry. During
the six months ended 30 June 2010, the Bank was awarded “Excellent Dealing Member” (RMB),
“Excellent Primary Dealer of Open-ended Market Business” (RMB), “Top 100 Entity for Trading
Volume in Interbank Market”, “Most Influential Market Participant”, “Excellent Dealing Member”,
“Most Influential Market Maker of the Year” and “Most Influential Market Maker of the Year for
Derivatives” by the National Interbank Funding Centre and China Foreign Exchange Trade System. It
was also awarded “Excellent Settlement Member of Proprietary Bond Trading”, “Excellent Settlement
Member of Bond Settlement Agency Business” and “Excellent Undertaker of Bond Counter Business”
by China Government Securities Depository Trust & Clearing Co. Ltd., and “Excellent Underwriter
of Book-entry Treasury Bond”.


Introduction of Products and Services

The Bank’s Treasury Operations include money market trading, investment portfolio management and
agency treasury operation for its clients.




                                                  108
Money Market Trading

The Bank’s money market trading activities include: (i) short-term borrowing and lending; and (ii)
bond repurchase and purchasing. In 2009, the transaction volume of the Bank’s domestic RMB money
market financing was RMB13,499.3 billion (US$2,054.1 billion), representing a 121.4 per cent.
increase over 2007. The trading volume in foreign currency money market in 2009 was USD689.2
billion. In the six months ended 30 June 2010, the transaction volume of the Bank’s domestic RMB
money market financing totalled RMB6,832.3 billion (US$1,039.6 billion) and the foreign currency
transaction volume in the money market reached USD272.9 billion.

Investment Portfolio Management

Trading Account

The Bank’s trading accounts are used to recognise and settle its proprietary trades, including trading
of bonds and bills which are issued by the Chinese government, PBOC and foreign governments as
well as derivatives, foreign exchange and foreign/local currency dominated bonds transactions. The
Bank is one of the largest market makers in the domestic interbank market. Furthermore, it avoids
investment risks by using derivative instruments. As at 30 June 2010, it was the market maker for 100
bonds in the interbank bond market, and 75 book-entry government bonds traded over the counter. In
2009, the trading volume of the Bank’s RMB-denominated bond transaction accounts was RMB2.60
trillion (US$0.4 trillion); the trading volume of RMB interest rate swap was RMB60,545 million
(US$9,213 million).

Banking Accounts

The Bank’s banking accounts are used to calculate its investments, which are made for holding
purposes. Currently, its investment portfolio includes RMB-denominated bonds, which are issued by
the Chinese government, PBOC, policy banks and a few other local financial institutions. It also holds
short-term commercial paper issued by domestic enterprises. In overseas markets, the Bank also
invests in foreign currency bonds issued by foreign governments, financial institutions, corporate and
international organisations.

Agency Treasury Operations

The Bank offers a wide range of treasury operation services to enterprises and individual clients. It
provides spot foreign exchange settlement and sale, forward foreign exchange trading, RMB and
foreign exchange swap and RMB interest rate swap services. It also acts as the agent of its clients in
treasury operations including 24-hour foreign exchange purchase and sale, precious metal purchase
and sale under account, forward currency contracts, interest rate swap, currency swap, options and
other financial derivatives trading services. In 2009, the business volume of the Bank’s foreign
exchange settlement and sale and foreign exchange trading on behalf of clients amounted to USD286.2
billion. Client-end gold trading volume reached 749 tonnes. The Bank has established innovative
structured deposit products, enriched their varieties and enlarged business scale. The trading volume
of agency-structured derivatives achieved USD82.2 billion.

Internationalised Business Development

The Bank took advantage of opportunities arising from the reform and reorganisation of global
financial markets to actively and properly implement the strategy of expanding its operations abroad,
which aimed at building a large global financial group with full functions.


                                                 109
As at 30 June 2010, the Bank had established 24 operational branches in 22 countries and regions, set
up 181 overseas branches, and established correspondent bank relationships with 1,424 overseas banks
in 128 countries and regions.

Furthermore, the scale of the Bank’s overseas assets has been increasing year by year, and it has
managed these assets well. As at 30 June 2010, the scale of the Bank’s overseas operating assets
increased to USD61.64 billion, representing an increase of 66.4 per cent. compared to that at the end
of 2007. In 2009, the profit before tax of its overseas branches was RMB3.87 billion (US$0.59
billion), representing an increase of 165.0 per cent. compared to the previous year.

During 2009 and 2010, the Bank opened branches in Vietnam and Malaysia, and in January five further
branches were opened in Europe (France, Belgium, the Netherlands, Italy and Spain), more than
doubling the Bank’s European presence.

Development of Integrated Business

In recent years, as the PRC’s legal and policy conditions for integrated financial operation are being
increasingly liberated, the Bank has taken advantage of the opportunity to develop a pilot programme
of integrated financial operation. It has made efforts to establish a diversified finance service platform
and accelerated the development of investment banking, asset management and financial leasing
business on the basis of its advantages in terms of client base, capital and information. The Bank’s
integrated operation strategy is mainly carried out by specialised holding companies, including:

Investment Banking

ICBC International, the Bank’s wholly owned subsidiary, engages in various investment banking
businesses, including sponsoring and underwriting, equity financing, debt financing, direct
investment, securities brokerage, and asset management, through its wholly owned subsidiaries. As at
the end of 2009, the total assets of ICBC International reached USD577 million, and its net assets
reached USD49.66 million. Net profits in 2009 were USD7.946 million.

Management of Securities Investment Funds

ICBC Credit Suisse Asset Management, the Bank’s subsidiary, mainly engages in the management of
securities investment funds. As at the end of 2009, there were 11 mutual funds under the management
of ICBC Credit Suisse Asset Management, and the assets of mutual funds under management were
approximately RMB62.7 billion (US$9.54 billion). Its total assets reached RMB836 million (US$127
million), and the net assets amounted to RMB675 million (US$103 million). Net profits in 2009 were
RMB176 million (US$27 million).

ICBC Credit Suisse Asset Management was awarded “2008 Gold Bull Asset Management Company”
by China Securities Journal, “2008 Star Fund Company in China” by Securities Times and “2009 Most
Respected Fund Company” by MoneyWeek.

Financial Leasing

ICBC Leasing, the Bank’s wholly owned subsidiary, mainly engages in financial leasing business. As
at the end of 2009, its total assets reached RMB33.082 billion (US$5.034 billion) and its net assets
reached RMB5.388 billion (US$0.820 billion). In 2009, net profits were RMB182 million. In
September 2009, the Bank made an additional investment of RMB3 billion (US$0.456 billion) to ICBC
Leasing, in order to facilitate the development of leasing business in a stable and rapid manner.


                                                   110
ICBC Leasing was awarded “2009 Best Financial Leasing Company” by Financial Times and “2009
Best Industry Contribution Award” by China Business News.

DISTRIBUTION CHANNELS

The Bank delivers its products and services through a variety of distribution channels. During the six
months ended 30 June 2010, it continued to focus on adjusting allocation of the regional branches,
upgrading and improving the outlets, building up service channels with tiered and classified functions
and systems, and improving service quality.

With respect to traditional branches and outlets, the Bank kept cultivating and improving the core
competence of its branches by coordinating the construction of various channels, optimising regional
layout of outlets and facilitating the transition of the outlets’ operation, so as to solidify the
advantages of its service channels. Meanwhile, the Bank has continued integrated operation between
its electronic banking network and its traditional branches. In terms of transaction volume, its
electronic banking services (including ATMs, self-service banking, internet banking, telephone
banking and mobile banking) ranked first among all commercial banks in the PRC.

In recent years, the Bank has been awarded “Global Best Integrated Corporate Banking Website”,
“Best Integrated Personal Banking Website in Asia”, “Best Mobile Banking”, “Best Marketing”, “Best
Electronic Banking”, “Outstanding Contribution Award of Internet Banking”, “Mobile Banking — Best
Wealth Management Application Award”, “Best User Experience Award” and “Electronic Banking
Brand of Greatest Customer Satisfaction” by Global Finance, Securities Times, Hexun.com and other
institutions.

Domestic branches

The Bank has a nationwide network of branches. As at 30 June 2010, it had 16,210 domestic
institutions, including its Head Office, 31 tier-1 branches, 5 branches under its direct management, 27
banking offices of tier-1 branches, 390 tier-2 branches, 3,060 tier-1 sub-branches, 12,658 outlets, 34
institutions directly controlled by the Head Office and its branches and 4 major holding companies.

With respect to growing its regional distribution of outlets, while the total number of outlets remained
stable, the Bank had 7,172 outlets in areas where financial resources are more abundant (the Yangtze
River Delta, the Pearl River Delta and the Bohai Rim regions) as at 30 June 2010. The percentage of
such outlets out of the Bank’s total domestic outlets was increased up to 44.4 per cent., representing
an increase of 0.7 per cent. from the end of 2007. In terms of functional transformation, from 2007
to 30 June 2010, the Bank established 167 wealth management centres and 3,737 VIP service centres.

Overseas branches

As at 30 June 2010, the Bank had set up 24 tier-1 operational branches in 22 countries and regions
such as Hong Kong, Macau, Korea, Japan, Vietnam, Singapore, Indonesia, Malaysia, Thailand, United
Arab Emirates, Qatar, Kazakhstan, United Kingdom, Germany, Luxembourg, Russia, Australia, United
States and Canada. The total number of its overseas branches increased from 112 at the end of 2007
to 181 at 30 June 2010. The Bank has established correspondent bank relationships with 1,424
overseas banks in 128 countries and regions. The branch network has been growing, and the Bank’s
global integrated operating platform has further improved. During the six months ended 30 June 2010,
the Bank acquired 70 per cent. of shares in the Bank of East Asia (Canada), and a controlling stake
in Thailand’s ACL Bank. The Bank’s Macau branch merged with Seng Heng Bank and became ICBC
Macau. The Bank has opened Industrial and Commercial Bank of China (Malaysia) Berhad and the
Hanoi branch in Vietnam. Its Abu Dhabi branch also commenced business. ICBC Macau, Seoul branch


                                                  111
and PT. Bank ICBC Indonesia further extended their service coverage and functions. The Bank’s
overseas branch network is also attaining scale. In January, five new European branches were opened
in France, Belgium, the Netherlands, Italy and Spain, more than doubling the Bank’s European
presence.

Electronic banking

As at 30 June 2010, the number of the Bank’s electronic banking customers increased by 117.9 per
cent. compared to that at the end of 2007. In 2009, the transaction volume of its electronic banking
services increased by 76.2 per cent. compared to 2007. In the six months ended 30 June 2010,
transaction volume of electronic banking services represented 54.6 per cent. of the Bank’s total
transactions, increasing by 17.4 per cent. compared to 2007.

During the six months ended 30 June 2010, the Bank, based on the needs of its customers, improved
the original products, accelerated product innovation, extended the functions of its products, satisfied
the needs of differentiated and individualised service and continued building its electronic banking
channel.

Internet banking

The Bank provides internet banking services through its official website: www.icbc.com.cn for a wide
range of customers. It also provides large corporation, government and financial institution customers
with specialised products and services through its “Bank-Enterprise Link”. As at 30 June 2010, the
number of the Bank’s corporate internet banking customers increased by 125.7 per cent. compared to
that at the end of 2007. The number of individual internet banking customers increased by 120.6 per
cent. compared to that at the end of 2007. In 2009, the transaction volume of the internet banking by
corporate customers increased by 57.9 per cent. compared to that of 2007, and transaction volume of
internet banking by individual customers increased by 329.5 per cent. compared to that of 2007.

During the six months ended 30 June 2010, the Bank launched the online large enterprise interbank
fund management system for large-scale group customers and online financial software in corporate
internet banking service targeted at small and medium enterprise customers, improving its internet
banking services for corporate customers. Meanwhile, it introduced new products such as cross-border
foreign exchange remittance and new-generation global cash management and added new features to
international settlement within corporate internet banking service. The Bank was the industry pioneer
in introducing online financial supermarket, small foreign exchange settlement and sales, remittance
to overseas Visa cards and other innovative products, and launched a range of new functions including
remittance to e-mail account and mobile phone number, inter-bank account management and online
application for credit cards, providing abundant and convenient internet banking services for
individual customers. The Bank opened a VIP personal internet banking service, and provided
high-quality customers with an exclusive service channel, service area, financial products and
promotions. The Bank also introduced customer experience mechanisms, and refined the product
functions of personal internet banking, corporate internet banking and other products, strengthening
the strong market position of its internet banking business.

The Bank’s internet banking services are widely recognised. During the six months ended 30 June
2010, it was awarded “Best Internet Banking in China” by The Asian Banker, “Best Integrated
Corporate Bank Website — Global”, “Best Internet Banking in Deposit Service— Global”, “Best
Personal Internet Banking of Asia” and “Best Personal Internet Banking of China” by the Global
Finance.


                                                  112
Telephone banking

The Bank provides a telephone banking service 24 hours per day and 365 days per year through
“95588”, accessible in all areas of the PRC, and “21895588”, accessible in Hong Kong.


During the six months ended 30 June 2010, the Bank completed the engineering construction of
integrated telephone banking, achieved the centralised management of all the call centres by the
general control system as well as the sharing and integration of bank-wide system resources, and
enhanced the ability of the telephone banking system in making contingency response and disaster
recovery management. The Bank accelerated the construction of electronic banking centres in
Shijiazhuang and Hefei and switched the telephone manual service systems at a large number of
branches, and enhanced their integrated and efficient operation. In addition, it introduced telephone
banking with 400 VIP service hotline, one-number-link payment service, telephone banking
reservation and customised menu set-up functions, launched interbank remittance, agency sales of
insurance products, foreign currency funds and other new products, and improved the functions of
funds purchasing and bill payment and the public voice menu of telephone banking, providing
extensive and convenient telephone banking services for customers.

The Bank’s telephone banking services have been widely accepted. In 2009, its “95588” telephone
banking was awarded “Excellent Financial Product” and “Excellent Financial Brand” in the 2009
China International Finance Exhibition hosted by the PBOC. In 2008, it was given three awards: “Best
Call Centre in Asia Pacific”, “Best Call Centre in China” and “Best Call Centre Manager in China”
in the Fifth Election of Asia Pacific Best Call Centre. In 2007, the Bank was awarded “Best Call
Centre Management Team in China” and “Best Call Centre Manager in China” in the election of Best
Call Centre in the PRC, and it also received “Special Contribution Award of China Call Centre” during
the fourth election of Best Call Centre in Asia Pacific.

Mobile banking


During the six months ended 30 June 2010, the Bank launched a new service of accessing the mobile
banking system through electronic commerce and mobile banking (WAP), broadened the channels and
the functions of electronic banking services and satisfied WAP customers’ needs in account
management, money transfer and remittance, agency bill payment, investment and wealth
management, consumption payment and other financial services. In cooperation with
telecommunication operators, the Bank has lowered the entry barrier for customers to use mobile
banking service and enhanced the security of WAP. It has added a rapid logon function to WAP,
improved the attractiveness of the trading interface and enhanced the user experience, to make WAP
more user-friendly. The Bank’s mobile banking business has witnessed a rapid increase in the number
of clients and the volume of transactions, and is establishing a strong market position in the industry
in the PRC.

Self-service banking


The Bank provides self-service banking through ATMs and other self-service terminals. As at 30 June
2010, it had 9,867 self-service banking centres, representing an increase of 101.8 per cent. over the
end of 2007. It had 38,836 ATMs, representing an increase of 65.8 per cent. over the end of 2007. In
2009, the transaction volume of ATMs reached RMB2,046.9 billion (US$311.5 billion), increasing by
91.4 per cent. compared to 2007.



                                                 113
MAJOR LOAN CUSTOMERS

As at 30 June 2010, the aggregate amount of loans offered by the Bank to its single largest client
constituted 3.0 per cent. of its net capital base and the aggregate amount of loans to its top 10 single
customers constituted 22.8 per cent. of its net capital base. As at 30 June 2010, the aggregate amount
of loans to the top 10 single clients reached RMB173 billion (US$26.3 billion) and constituted 2.7 per
cent. of the Bank’s total amount of loans.

INFORMATION TECHNOLOGY

After many years of development, the Bank has gradually established an IT system and technical
platform compatible with its position as a large international bank, providing strong support for its
business development and innovation and operation management reform.

The Bank’s safe and stable information system supports its stable operation

The Bank has attached great importance to the security management of information systems, and has
kept on improving the management system of the production process so as to ensure the safe and stable
operation of the information system. In recent years, in line with diversification of products and
services provided by the Bank and the constant expansion of its business volume, the average daily
transaction volume in its data centre has reached RMB 130 million (US$20 million) as at 30 June
2010, an increase of 60.6 per cent. over the end of 2007. Average daily peak business volume exceeded
RMB 173 million (US$26 million), 54.9 per cent. higher than that of 2007. In the context of a
significant increase in the Bank’s business volume, the overall availability of the information system
has been kept above 99.98 per cent., supporting the stable operation of the Bank’s business and
providing safe, stable, high-quality and highly efficient services to its clients.

The Bank’s disaster backup system has been consistently improved and has reached an advanced
international level. The Bank has established a disaster backup system at a level of one thousand
kilometres, reaching Grade 6 according to the international standards for disaster backup systems,
with the highest grade being Grade 7. It has prepared graded standards for disaster backup and
completed disaster-backup protection strategy applicable to all of its application systems. The Bank
has started the “two localities and three centres” construction. In addition to the existing Shanghai
Data Centre and Beijing Backup Centre, a Shanghai Backup Centre will be built to further improve
the operation ability of the Bank’s information system and its business.

The Bank has further improved the levels of automation, supervision and management of its process
and operation and effectively minimised its operational risks. It has gradually increased the level of
automation in batch processing in system operation so as to minimise the risks caused by manual
operation. It has also set up a centralised and unified monitoring management platform (ECC) and
achieved the ability to monitor various business systems according to channel and business nature, and
improved the system’s ability to monitor and respond.

The Bank has made great achievements in information security and protection. It has established an
information security management system, facilitated implementation of the security management
system at the client’s end and strengthened the security management of the computers used by
employees to prevent risks of computer virus encroachment and information leak-out. The Bank has
also strengthened the security protection of its electronic banking, enhanced the security of
“U-Shield”, adopted various security methods such as real time notification of balance through SMS
and established a specialised team to protect the security of information to ensure the security of its
customer information as well as other systems such as internet banking.


                                                  114
The Bank’s technology system supports its business operation

Insisting on the principle of independent research and development, the Bank has set up a series of
application products covering a wide range of businesses, categories and functions. Its advanced IT
platform provides strong support and a driving force for it to innovate its products, improve its
services, promote process reengineering, build a global service platform, achieve transformation of its
operation model and improve its risk management ability.

The Bank’s technology system supports improvement of product innovation and service
capability

To provide its clients with a range of financial products, the Bank has developed a wide variety of
products, such as bank account, wealth management in domestic and foreign currencies, global cash
management, international settlement, private banking, wealth management, foreign currency
remittance, express global remittance and precious metal trading.

To support the rapid development of electronic banking services, the Bank has established electronic
service channels with the PRC’s leading technology and a large variety of products and extensive
functions, including online corporate banking, online personal banking, telephone banking and mobile
banking (WAP), and multi-media self-service terminals. The Bank also launched the first mobile
banking service supporting the 3G technology in the domestic market.

To improve the competitiveness of the bank card business, the Bank was the first to issue credit cards
in compliance with the EMV2000 international standards and credit cards satisfying the PBOC 2.0
requirements. The Bank has achieved the capability to integrate fund processing systems of banking,
transportation, education, medical care and insurance into one chip card (i.e., citizen IC card).

The Bank’s technology system provides support for its international development strategy

The Bank has independently developed its own FOVA system and consistently improved its function.
As at 30 June 2010, all of its overseas branches were generally covered by the FOVA system. The Bank
has put in place an integrated global scientific and technological platform, so as to provide support
to the management of its overseas business.

The Bank has extended its application systems to foreign countries, such as internet banking, asset
custody and credit management operation statistic, and therefore has improved the customer service,
risk management and business management of its overseas operation, promoting the domestic/foreign
interaction.

The Bank has pushed forward the research and development and promotion of its overseas bank card
project and became the first bank in the world to issue a standard UnionPay card in Europe.

The Bank’s technology system provides technical support to the transformation of its
business operation model

The Bank has implemented the centralisation of information to support client management. The Bank
has set up a data warehouse platform for the transformation from data centralisation to information
centralisation. The Bank constantly monitors the data mining and analysis, improved the Customer
Relationship Management System (CCRM, PCRM), Comprehensive Statistic System (CS2002),
Performance Evaluation Management System (PVMS) and other analytic application systems. It has
also set up a centralised platform for customer relationship analysis and marketing management to
achieve customer classification and differentiated marketing through the analysis of customer
information and their use of the Bank’s financial products.


                                                 115
The Bank has implemented the centralisation of its financial information. It has developed an
integrated financial management system so that its financial information can be centralised at tier-1
branches. Through its accounting report management system, the Bank has achieved the automatic
generation of information to be disclosed to the public.

The Bank’s technology system provides a safeguard for its risk control

Credit risk

The Bank      constantly monitors    its corporate/individual credit management system
(CM2002/PCM2003) to prevent credit risks. It sets up an internal rating score card system for credit
risks which has provided a solid base for implementing the advanced Internal Ratings Based
Approach.

Market risk

The Bank has developed a core system of market risk management and has in place a unified and
centralised platform to measure, monitor, control and manage market risks. It has improved its interest
rate management system to provide comprehensive information for its market risk management.

Operational risk

The Bank has set up a centralised, fully fledged and shared platform for the management of business
operational risks to improve operational risk management. It has improved its real-time settlement
system, and system functions such as the centralised parameters management and the centralised
reconciliation system, to strengthen its operational risk management.

The Bank has one of the most advanced IT platforms within the PRC banking industry and has made
great achievements in the IT field, which is well recognised by domestic and overseas markets and
institutions. For 2008 and 2009, the Bank was consecutively elected on the list of “China Top 500
Enterprises in Leading IT Applications” by National Information Evaluation Centre and was ranked
first for the year of 2008 and 2009. It was also awarded “Global Network Application Innovation
Award”, “Global Best Bank in Cash Management” and “Global Best Business Continuity
Management” by The Banker (UK) in 2006, 2007 and 2008. In 2007 and 2009, it was awarded “The
Best IT Bank” by The Chinese Banker in the PRC.

Recent Developments

Privatisation of ICBC (Asia)

On 28 July 2010, the Bank’s Board of Directors reviewed and approved a proposal to privatise its
Hong Kong subdivision, Industrial and Commercial Bank of China (Asia) Limited (ICBC (Asia)) by
means of a scheme of arrangement. According to such scheme of agreement, the cancellation
consideration per scheme share of ICBC (Asia) was HKD29.45. ICBC (Asia) had issued 1,352,061,533
shares, of which 984,364,740 shares were held by the Bank, representing approximately 72.81 per
cent. of the total shares of ICBC (Asia) and 367,696,793 shares were held by shareholders other than
the Bank, representing approximately 27.19 per cent. of the total shares of ICBC (Asia). The total cash
payment for the privatisation of ICBC (Asia) by the Bank was approximately HKD10,828.67 million.
On 8 October 2010, the Bank and ICBC (Asia) jointly issued the scheme document. The scheme of
arrangement was sanctioned without modification and the reduction of share capital of ICBC (Asia)


                                                 116
was confirmed by the High Court of Hong Kong on 20 December 2010. As of 21 December 2010, all
of the conditions of the scheme of arrangement were satisfied and the scheme of arrangement came
into effect. The withdrawal of listing of the shares of ICBC (Asia) on the Hong Kong Stock Exchange
became effective from 9.30 a.m. on 21 December 2010.


Establishment of Pakistan Branch

The Bank received formal approval from the State Bank of Pakistan on 17 December 2010 for its
application for the establishment of a branch in Pakistan.

Acquisition of stake in Bank of East Asia


On 23 January 2011, the Bank announced that it has agreed to buy a 80% stake in Bank of East Asia
Ltd’s United States operations for US$140 million and this acquisition will enable the Bank to
establish a presence in the U.S. and further expand its retail banking business and operation network
across the U.S.. Completion of this acquisition is subject to regulatory approval in the U.S. and in
China.

Matters relating to Fund Raising


Rights Issue of A Shares and H Shares


The meeting of the Bank’s Board of Directors held on 28 July 2010 and the Second Extraordinary
General Meeting of 2010, the First A Shareholders Class Meeting of 2010 and the First H Shareholders
Class Meeting of 2010 held on 21 September 2010 considered and approved the Bank’s proposed
rights issue of A Shares and H Shares. The Bank received the approval from the CBRC on 29
September 2010 in respect of the proposed rights issue of A shares and H shares. The shares under the
A Shares Rights Issue and H Shares Rights Issue were placed to A Shareholders and H Shareholders
on the basis of 0.45 Rights Shares for every 10 existing shares. As approved by the Shanghai Stock
Exchange, a total of 112,262,153,213 RMB denominated ordinary shares under the A Shares Rights
Issue was listed on 30 November 2010, and a total of 3,737,542,588 H Rights Shares under the H
Shares Rights Issue commenced trading on the Hong Kong Stock Exchange at 9.30 a.m. on 28
December 2010. The total gross proceeds raised under the A Share Rights Issue and the H Share Rights
Issue were RMB33,673,838,106.87 and HK$13,044,039,978.07 (US$5,123,990,095 and
US$1,672,613,030), respectively. All proceeds from the rights issue, after deduction of the expenses
relating to the issuance, will be used to strengthen the Bank’s capital base.




                                                 117
                                                 FUNDING AND CAPITAL ADEQUACY

FUNDING

The Bank’s funding operations are designed to ensure stability of funding, minimise funding costs and
effectively manage liquidity. The Bank aims to maintain a diversified funding base, although customer
deposits have always been its main source of funding. The Bank’s funding is primarily derived from
retail deposits placed with it by its corporate and consumer clients. It also derives funding from
shareholders’ equity, debt instrument issuance and interbank borrowings. The Bank raises foreign
currency from customers’ foreign currency deposits and occasionally from borrowings with
counterparties.The following table gives a breakdown of the Group’s customer deposits (on a
consolidated basis) classified by product type and business line as at the dates indicated:

                                                                                               Unit: In RMB/USD millions, except for percentages

                                                       As at 30 June                                                                 As at 31 December

                                              2010                               2009                             2009                               2008                          2007

Item                             Am ount    Am ount    Percentage      Am ount    Percentage         Am ount    Am ount    Percentage      Am ount    Percentage         Am ount    Percentage

                                 (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)            (%)
Corporate deposits

Time deposits . . . . 1,914,605             291,336             17.7 1,745,091                18.3 1,625,829    247,395             16.6 1,380,907                16.8 1,039,853                15.1

Demand deposits . . . 3,448,278             524,708             31.9 2,976,113                31.2 3,162,661    481,247             32.4 2,558,060                31.1 2,362,830                34.2

Sub-total . . . . . . . 5,362,883           816,045             49.6 4,721,204                49.5 4,788,490    728,642             49.0 3,938,967                47.9 3,402,683                49.3

Personal deposits
Time deposits . . . . 3,038,107             462,295             28.0 2,815,409                29.5 2,852,197    434,005             29.2 2,578,265                31.4 2,069,506                30.0

Demand deposits . . . 2,054,883             312,682             19.0 1,740,969                18.3 1,808,235    275,151             18.5 1,431,983                17.4 1,174,568                17.0

Sub-total . . . . . . 5,092,990             774,976             47.0 4,556,378                47.8 4,660,432    709,156             47.7 4,010,248                48.8 3,244,074                47.0

               (1)
Overseas             . . . . .   221,591      33,718             2.0   155,049                 1.6   185,640      28,248             1.9   158,222                 1.9   136,707                 2.0
         (2)
Others           . . . . . .     155,325      23,635             1.4   100,486                 1.1   136,715      20,803             1.4    116,009                1.4    114,949                1.7

Total . . . . . . . .1 0,832,789 1,648,375                   100.0 9,533,117              100.0 9,771,277 1,486,849             100.0 8,223,446               100.0 6,898,413               100.0




(1)       Includes overseas branches and domestic and overseas subsidiaries


(2)       Mainly include outward remittance and remittance payments.


The following table gives a breakdown of the Group’s customer deposits (on a consolidated basis)
classified by remaining maturity for the periods indicated:

                                                                                               Unit: In RMB/USD millions, except for percentages

                                                       As at 30 June                                                                 As at 31 December

                                              2010                               2009                             2009                               2008                          2007

Item                             Am ount    Am ount    Percentage      Am ount    Percentage         Am ount    Am ount    Percentage      Am ount    Percentage         Am ount    Percentage

                                 (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)            (%)
Demand (1) . . . . . . 5,809,325            883,978             53.6 4,861,330                51.0 5,227,043    795,375             53.5 4,177,866                50.8 3,817,479                55.3

Less than 3 months . . 1,626,280            247,463             15.0 1,453,268                15.2 1,519,544    231,222             15.6 1,350,735                16.4 1,098,218                15.9

3 to 12 months . . . . 2,869,767            436,679             26.5 2,596,970                27.3 2,359,489    359,032             24.1 2,098,624                25.5 1,506,322                21.8

1 to 5 years . . . . .           524,966      79,882             4.9   613,731                 6.4   655,590      99,758             6.7   590,151                 7.2   472,861                 6.9
Over 5 years . . . . .              2,451       373              0.0      7,818                0.1      9,611      1,462             0.1      6,070                0.1      3,533                0.1

Total . . . . . . . .1 0,832,789 1,648,375                   100.0 9,533,117              100.0 9,771,277 1,486,849             100.0 8,223,446               100.0 6,898,413               100.0




(1)       Includes the time deposits payable on demand.



                                                                                                118
The following table sets forth the Bank’s core capital and supplementary capital, risk-weighted assets
and capital adequacy ratios (on a standalone basis) computed in accordance with the applicable CBRC
guidelines and measured in accordance with PRC GAAP:

                                                                  Unit: In RMB/USD millions, except for percentages

                                                     As at 30 June                            As at 31 December

Item                                              2010                  2009           2009             2008        2007
                                             (RMB)     (US$)        (RMB)         (RMB)     (US$)      (RMB)       (RMB)
Core capital . . . . . . . . . . . . . .     667,384   101,553          581,870   622,121     94,665    543,642     487,955
Share capital . . . . . . . . . . . . . .    334,019     50,826         334,019   334,019     50,826    334,019     334,019
Reserves . . . . . . . . . . . . . . . .     328,044     49,917         243,347   283,061     43,072    205,668     148,631
Minority interests . . . . . . . . . .         5,321       810            4,504     5,041        767      3,955       5,305
Supplementary capital . . . . . .            140,838     21,431         126,691   172,994     26,324    121,998      94,648
General provisions for loan
  impairment . . . . . . . . . . . . .        63,544      9,669          88,739    97,994     14,911     82,834      47,979
Long-term subordinated bonds . .              75,000     11,412          35,000    75,000     11,412     35,000      35,000
Other supplementary capital . . .              2,294       349            2,952        —          —       4,164      11,669
Total capital base before
  deductions . . . . . . . . . . . . .       808,222   122,983          708,561   795,115   120,989     665,640     582,603
Deductions . . . . . . . . . . . . . . .      48,431      7,370          44,233    63,159      9,611     45,607       5,862
Unconsolidated equity
  investments . . . . . . . . . . . . .       20,398      3,104          17,783    19,559      2,976     19,499       3,868
Goodwill . . . . . . . . . . . . . . . .      25,012      3,806          23,581    24,621      3,746     20,579       1,878
Others . . . . . . . . . . . . . . . . . .     3,021       460            2,869    18,979      2,888      5,529         116
Net capital base . . . . . . . . . . .       759,791   115,614          664,328   731,956   111,378     620,033     576,741
Net core capital base . . . . . . .          630,662     95,965         547,963   586,431     89,234    510,549     484,085
Risk weighted assets and
  market risk capital
  adjustment . . . . . . . . . . . . . 6,698,521 1,019,283          5,494,937 5,921,330     901,021    4,748,893   4,405,345
Core capital adequacy ratio . .               9.41%                      9.97%     9.90%                 10.75%      10.99%
Capital adequacy ratio . . . . . .           11.34%                     12.09%    12.36%                 13.06%      13.09%




                                                                  119
                                     RISK MANAGEMENT

ACHIEVEMENTS IN RISK MANAGEMENT IN RECENT YEARS

Since its initial public offering in 2006, the Bank has actively responded to the challenges brought by
various uncertain factors and risks by enhancing corporate governance and improving internal control.
It has continued to improve its comprehensive risk management system, strengthened the construction
of comprehensive risk management policies, developed and completed templates for risk evaluation,
gradually established an industry-leading risk information system and built up a comprehensive risk
management system with its unique characteristics which will be continuously monitored with a view
to its improvement and refinement. In particular, in the first half of 2010, the Bank achieved extensive
progress in risk management. It further improved the comprehensive risk management framework at
the group level by adding concentration risk, reputational risk and strategy risk management into the
framework, consistently enhanced the promotion and application of internal rating achievements and
successfully completed the preliminary assessment of the implementation of Basel II. The Bank
implemented the requirements of the “Three Measures and One Guideline” of the CBRC and actively
promoted the implementation of Basel II. The Bank has accelerated the construction, development and
improvement of its quantitative risk measurement system, including the Internal Rating-Based (IRB)
Approach on credit risk, Internal Models Approach (IMA) on market risk and Advanced Measurement
Approach (AMA) on operational risk, and expanded its applications throughout the risk management
process.

In recent years, the Bank has achieved a series of satisfactory results in risk management. Its
achievement can be summarised as “full process, full coverage, new standards and new technologies”.
In particular, the Bank has implemented risk management throughout the entire process of risk
identification, measurement, control, monitoring, evaluation and reporting. Its risk management
covers all of its entities from the group level to all overseas branches and all business operations. The
Bank has taken the initiative in the PRC in developing and researching measurement methods of
various risks defined in Basel II and maintained a strong market position in risk measurement. It has
established an industry-leading IT support system with the capability to comprehensively cover the
entire risk management process, in order to provide technical support for risk management.

The Bank’s ongoing efforts in risk management in recent years have achieved remarkable results. It
has continued to improve its assets quality and taken a strong market position in this regard in the PRC
banking industry. As at 30 September 2010, 30 June 2010, 31 December 2009, 31 December 2008 and
31 December 2007, the Bank’s NPL ratios were 1.15 per cent., 1.26 per cent., 1.54 per cent., 2.29 per
cent. and 2.74 per cent. respectively, showing a declining trend over the years.

Further improvement on the Bank’s comprehensive risk management system

The Bank has structured market risk measurement techniques based on its IMA for market risk

The Bank has engaged in the construction of a market risk management system, improved its market
risk measurement and control, and achieved centralised management of market risk measurement.
Since the second quarter of 2008, the Bank has measured the Value at Risk (VaR) for the trading
accounts at its Head Office (including products such as RMB and foreign currency denominated
bonds, settlement and sales of Renminbi, and foreign exchanges trading) by utilising historical
simulation data (using a 99 per cent. confidence interval, 1-day duration and historical data for 250
days).


                                                  120
The Bank has launched independent research and development projects for financial market business
and risk management, and through these projects it has learned the advanced risk measurement and
pricing techniques that are used in the world. The Bank will use fully-priced historical simulation data
to measure its VaR and develop its VaR measurement model and a series of other methodologies for
risk measurement, including a pricing/valuation model for products in financial market business and
sensitivity calculation methods to improve its overall capabilities in relation to market risk
measurement.

The Bank has established its market risk measurement approach and has standardised its market risk
measurement methodologies and techniques.

The Bank’s operational risk has basically satisfied the requirements set out in the standardised
approach

The Bank is among the first in the PRC to have adopted the Advanced Measurement Approach (AMA)
for operational risks. It has improved the timeliness and completeness of data collection, gradually
established a unified operational risk data mart through centralised management of operational risk
data and improved timeliness and informatisation of its operational risk management.


The Bank has also increased its internal verification efforts for loss events caused by operational risk
and improved the completeness and accuracy of its loss data statistics.


Further, the Bank has enriched and improved its operational risk management tools, including
operational risk and control self-assessment and key risk indicators analysis and scenario analysis, and
consistently expanded the application of these tools in operation management, which has gradually
enhanced the sensitivity and reliability of its operational risk management.

In addition, the Bank has established implementation measures for the measurement of regulatory
capital for operational risk and has standardised measurement rules and procedures under the
Standardised Approach.

Further improvement of the Bank’s IT system which covers the entire risk management process


The Bank has established and improved its IT system which covers the entire risk management process
including risk identification and measurement, risk control, monitoring and assessment as well as risk
reporting. Its key risk management processes and the corresponding IT system are set out below.

Credit Risk Management Systems

The Bank’s information systems related to credit risk management include the asset management
system (CM2002/PCM2003) and the new generation asset management system (overseas version)
which is currently under development.




                                                  121
The asset management system (CM2002/PCM2003) is a centralised, network-based and large scale
data application system that is built on an open platform based on advanced information technology,
covering all credit business for the Bank’s corporate and individual customers.


                                                Credit management

                    Asset management system                                       Asset management system
                           (CM2002)                                                      (PCM2003)




                              Client                                    Risk

                              access                                    measurement

                              control                                   control



                                              IRB risk management systm                         Other related systems
     Special mention      Non-performing
        customer          credit customer     Non-retail internal rating systm                      Credit rating and
       information           payables                                                             authorisation system
          system           collctio system
                                                  Customer rating system
     PBOC individual      PBOC corporate
     credi information   credit inormation       Debt facility rating system
     collecon system     collction system
                                                   RAOC rating systm


           CBRC
        information
     disclosure system                          Retail internal rating system




Leveraging on the advantage of data centralisation, the Bank has established a new type of credit
management system mainly represented by the asset management system (CM2002/PCM2003). This
system, supplemented by the special mention customer information system, PBOC personal credit
information collection system, credit rating and authorisation system, IRB risk management system
and other systems, forms the Bank’s comprehensive credit risk management application system. The
Bank has achieved full integration and business process reengineering in the credit risk asset business.

The Bank is among the first in the PRC to establish a unified asset management system
(CM2002/PCM2003), covering the entire credit business, for all of its corporate and individual
customers. Through centralised data management, it has achieved automation, standardisation and
strict control on its credit business process and promoted the reform of, and innovation in, the internal
management of its credit business and improved its risk control capabilities.

In terms of customer access control, the Bank has formed a customer credit risk management system
cluster with the CIIS system as portal and the CBRC information disclosure system and the PBOC
credit information collection system as the key components, achieved the seamless connection with
the asset management system (CM2002/PCM2003), and further enhanced credit risk protection against
non-performing credit customers, in particular, the ability to control inter-bank credit risk.

In terms of risk measurement and monitoring, the Bank has established a unified bank-wide
measurement and management system for non-retail and retail credit risk. Its credit risk management
has transformed from a simple function of risk control and monitoring to an integrated risk
management process consisting of risk identification, measurement, monitoring and control. The
sophistication of the Bank’s risk management has been improving. At the same time, the Bank has
applied the quantitative results into the risk management process, achieving a linked system with its
front office credit system and credit card system.


                                                             122
In terms of credit rating and authorisation, the Bank has achieved unified credit control for loans,
bills, cash transactions and other businesses through a unified credit verification and control system
that covers the credit calculation and credit line application approval process for all types of
customers, effectively enhancing credit and non-credit risk control.


Market Risk Management System


         Financial market                                   Risk control                               Accounting and
            transaction                                     measurement                                   clearing
                                     Data collection                                   Submission


                      Input                                              Store the                                  Processing of
                      transactions                                       calculation                                accounts




                                                       Risk management system                       Accounting and clearing
          Reuters Kondor+                                                                                   system


          Bloomberg BTS                                 Market risk management                       Misys Summit
                                                                 system                                                       N
                                                                                                                              O
           Misys Summit                                                                                                       V
                                                                                                                              A
                                                                                                         BIFT
                                                         Product control system
              BIFT




To integrate all types of fund business in the financial market trading system into a unified market risk
management platform and to accurately report risk management information to the Board of Directors
and management in a timely manner, the Bank has established a full process market risk management
system framework comprising transaction bookkeeping at the front office, risk measurement control
at the middle office and clearing systems at the back office.


At the front office financial market transaction level, the RMB fixed income and bond businesses are
managed through the BIFT system independently developed by the Bank. Foreign currency
transactions and foreign money market transactions are managed through the Kondor+ system. The
foreign currency fixed income business is managed through the BTS system and foreign currency
derivatives are managed through the Summit system.

At the middle office risk control and measurement level, leveraging the Bank’s market risk
management system, the Bank has achieved the centralisation of market risk data collection,
measurement and management, supporting the daily VaR measurement, stress test, backtesting and
limit management for market risks in relation to financial market transaction accounts. Meanwhile,
through its product control system, the Bank independently conducts verification and analysis of the
position, price, value and profit and loss of financial market products to ensure the authenticity and
accuracy of the different elements of the financial market transactions, which is an important means
to guard against false and erroneous transactions.


At the back office accounting and clearing level, the Bank conducts account clearing through the BIFT
system and the Summit system. In addition, it manages accounts clearing and handling by linking the
above systems to its core application system, NOVA. At the same time, it has achieved the
reconciliation function for its front, middle and back offices.




                                                                 123
Operational Risk Management System

The Bank’s operational risk management system runs through the entire process of pre-event
management, event control and after-event supervision. The Bank has achieved effective control and
prevention of operational risk through the hard control means provided by its system, focused on the
further enhancement of the level of centralised risk control and strengthened management in high-risk
business areas and key steps. Meanwhile, it is actively promoting the development and application of
the AMA for operational risk and enhancing its ability in operational risk management and
measurement to meet the requirement of CBRC’s advanced approach for Operational Risk.


               Pre-event                                                               After-event
                                                  Event Control
              Management                                                               Supervision




          Internal management of           Business parameters management         Business operational risk
                bank tellers                                                        management system

                                          Accounting parameters management

          Uniform user verification                                             Customer reconciliation system

                                        Wholesale agency business management


                                                Business centralisation
                                                                                     Application and
                                                                                  management system for
                                          Remote authorisation management         AMA for operational risk


                                         Business operational risk management




As regards the internal management of its tellers, the Bank has established strict control over tellers’
job functions, as well as their scope of business and business operations by managing several
parameters relating to tellers’ authority cards and authorised limits. Through its unified authentication
system, it has achieved flexible definitions and strict control over the interaction between users of the
open platform system and its professional systems, job authority limits and business operations.

Based on the idea of parametric business management, the Bank has achieved full standardisation and
control of business processing workflow and accounts processing logic. Based on its management
principle of “separating handling from authorising and requiring authorisation in handling”, the Bank
has achieved rigid control management over the relevant approval processes involved in accounting
elements allocation, deposits and withdrawals. Through promoting the segregation of front end and
back end in its business processes and establishing a bank-wide centralised system of business
processing, the Bank has achieved centralised risk management and enhanced its risk control ability.

The Bank has developed systems for reconciliation between banks and corporations, credit cards
reconciliation and personal consolidated account reconciliation, providing its customers with
information related to their accounts and transactions through various channels so that they can verify
and confirm such reconciliations, and as a result has enhanced customer supervision of its operations.




                                                        124
At present, the Bank is further promoting the construction and application of AMA for operational
risk. Through a quantitative model, the Bank can provide an integrated evaluation of its internal and
external loss data on operational risk, the results of scenario analysis and internal risk control and
business environment factors. In addition, the Bank has achieved measurement and allocation of its
operational risk regulatory capital. These efforts help the Bank to effectively identify, assess, monitor,
control and mitigate its operational risks. Through the refinement of the measurement, the Bank has
enhanced its risk management and capital utilisation and set up a solid foundation for comprehensive
capital adequacy management.

IMPLEMENTATION OF BASEL II

The CBRC issued “The Guidelines on the Implementation of Basel II by China’s Banking Sector” in
February 2007 and made an official decision to regulate the first batch of commercial banks under
Basel II from 2010, and in any case no later than 2013. To strive to be among the first batch of
domestic banks to be approved to implement Basel II, the Bank established a project team in 2007 for
the implementation of Basel II on top of the existing project team for its IRB project. This project team
is responsible for making decisions on important matters in relation to the implementation of Basel
II.


In recent years, the Bank has actively promoted the implementation of Basel II in accordance with the
requirements of the “Plan for the Implementation of Basel II”. With its efforts in the past few years,
the Bank has essentially completed the preparation for the first pillar of Basel II and has actively
started building the second pillar.

Implementation of the First Pillar


The Bank’s credit risk has generally satisfied the requirements of the IRB Approach

IRB Approach in relation to non-retail business


The Bank’s IRB project for non-retail business credit risk was launched in September 2005 and was
completed at the end of 2006. On the transaction level, the Bank has established a two-dimensional
rating system consisting of customer rating and loan rating, achieved the scientific measurement of the
probability of default (PD) and loss given default (LGD) indicators; on the portfolio level, it has
developed sector rating, regional rating and solvency rating in relation to the provinces and
municipalities.




                                                   125
Based on the results of the IRB project, the Bank has strengthened the application of its IRB system
in areas such as loan pricing and approval, loan classification, provisions for reserves, performance
review, risk reporting and portfolio management. It has also developed the customer rating
optimisation system, debt rating system, customer RAROC system, portfolio rating system and data
mart. Since the commencement of operation, these systems have been in stable operation.
Measurement results from these systems have gradually been used in the Bank’s risk management
decision-making process.



                   Module 1: Credit risk quantification-                 Module 2: Application of risk
                             internal rating                                   quantification
     Transaction level




                          Customer rating                   PD                 Pricing and approval


                                                                                Loan classification
                            Debt Facility
                                                            LGD
                               rating
                                                                              Provisions for reserves


                                            Sector rating                      Performance review
     Portfolio level




                                        Regional rating                           Risk reporting



                                Solvency rating of provinces and               Portfolio management
                                        municipalities




IRB Approach in relation to retail business

The Bank’s IRB project for retail business credit risk was launched in March 2006 and was completed
at the end of March 2008. The Bank has preliminarily established a credit rating modelling system
which covers the entire lifecycle of retail business and an asset pool dividing system which covers all
retail asset risk exposure, and realised the first measurement of its risk parameters.

In the first half of 2009, the individual loan and credit card modules of the Bank’s individual customer
internal rating system were put into operation. At the end of 2009, the Bank launched an individual
customer RAROC rating system and achieved the RAROC projection and minimum lending interest
rate calculation functions on new loan applications.


At the beginning of 2010, the Bank fully launched its retail internal rating model management
platform which combines the implementation and approval functions for model development,
verification and application to achieve a streamlined, automated retail internal rating measurement
model management. The project is implemented in phases, with the first phase primarily covering the
development of the system framework, collection of basic data, model indicator processing, model
verification and approval process management. The Bank has completed the research and development
of these items and has now progressed into the testing phase. It is expected that the application of the
platform will commence soon.




                                                                   126
Advanced measurement of credit risk

In 2008, the Bank launched its credit risk advanced measurement project to solve portfolio risk
measurement and derivatives EAD measurement and it has established stress test scenarios and
methodologies, which has further improved its credit risk management.


Verification of credit risk measurement

Since the second half of 2009, the Bank has launched its credit risk measurement verification project,
which enables comprehensive verification of its credit risk measurement methodologies, results,
systems, processes and IT systems and improves the stability and reliability of its rating system.


Currently, the Bank’s IRB approach for credit risk has been used across the entire risk management
process, including customer selection, credit rating, pricing, credit authorisation, credit approval and
quality classification, providing risk measurement for risk management in all of its business
processes.

Construction of the Bank’s market risk internal model project


The Bank is striving to construct a market risk internal model to implement Basel II. In 2009, it
comprehensively launched independent research and development projects for its financial market
business and risk management, targeting the establishment of a market risk internal model. The core
tasks are to develop the independent research and development system for market risk management,
and to establish and improve the market risk management system and procedures, as well as risk
measurement methods and valuation models, to improve the Bank’s market risk management in line
with the best international standards. The application and operation of these systems and models are
expected to fully commence in 2011, which will generally satisfy the quantitative requirements of the
market risk internal model approach.


The Bank’s operational risk has basically satisfied the requirement of the standardised approach

In 2008, the Bank was among the first in the PRC’s banking industry to launch the Advanced
Measurement Approach (AMA) project. Major aspects of the project have now been completed. The
AMA application system is able to support electronic-based management of the various tools for
operational risk such as the automatic collection of operational risk loss data and self risk assessment,
which changes the Bank’s previous manual-based management approach and enhances the timeliness
and completeness of data collection. The Bank has gradually established a bank-wide standardised
operational risk data mart through centralised management of operational risk data, and improved the
timelines and effectiveness, as well as the informatisation, of its operational risk management.

Implementation of the Second Pillar


In July 2009, the Bank commenced a management consultation project relating to the Internal Capital
Adequacy Assessment Process (ICAAP) in connection with the implementation of the second pillar.
The project will provide the Bank with an integrated internal capital adequacy assessment process to
fully evaluate various substantial risks faced by it, the quality of its risk management and overall
capital adequacy. So far, the Bank has completed the development of templates for risk evaluation,
preliminarily established the comprehensive risk evaluation system and achieved certain milestones.



                                                  127
                    DESCRIPTION OF THE BANK’S ASSETS AND LIABILITIES

OVERVIEW

The Bank follows a strategy of limiting its exposure to particular sectors or borrowers by building a
diverse asset portfolio.


As at 30 June 2010, the Bank’s total gross advances to customers were RMB6,354,384 million
(USD966,917) which represented 49.0 per cent. of its total assets.

The table below sets out a breakdown of the Bank’s total assets as at the indicated dates:

                                                                                            Unit: In RMB/USD millions, except for percentages

                                 As at 30
                                September                        As at 30 June                                                        As at 31 December

                                  2010                  2010                           2009                            2009                         2008                       2007

Item                             Amount     Amount     Amount Percentage         Amount Percentage        Amount      Amount Percentage Amount Percentage              Amount      Percentage

                                 (RMB)      (RMB)      (US$)         (%)         (RMB)        (%)         (RMB)       (US$)     (%)         (RMB)          (%)         (RMB)          (%)



Total loans to customers . . 6,571,512 6,354,384       966,917             — 5,436,469              —     5,728,626   871,698         — 4,571,994                —     4,073,229         ——

Less: Allowance for
    impairment losses on
    loans . . . . . . . .         159,158    151,990    23,128             —      136,353           —      145,452     22,133         —     135,983              —      115,687          ——

Loans to customers, net . . 6,412,354 6,202,394        943,789          47.9 5,300,116          46.4      5,583,174   849,565      47.4 4,436,011            45.5      3,957,542        45.66

Investment in securities,
    net . . . . . . . . . 3,750,638 3,729,253          567,463          28.8 3,116,441          27.3      3,599,173   547,669      30.5 3,048,310            31.2      3,107,328        35.88

Cash and balances with
    central banks     . . . . 2,266,208 2,111,745      321,334          16.3 1,648,941          14.4      1,693,048   257,623      14.4 1,693,024            17.4      1,142,346        13.11

Due from banks and other
    financial institutions,
    net . . . . . . . . .         304,421    349,263    53,146             2.7    176,872           1.5    235,301     35,804         2.0   168,363              1.7    199,758          2.33

Reverse repurchase
    agreements      . . . . .     366,015    279,136    42,475             2.1    943,284           8.2    408,826     62,209         3.5   163,493              1.7     75,880          0.99

Others . . . . . . . . .          318,251    288,590    43,913             2.2    248,953           2.2    265,531     40,405         2.2   247,945              2.5    200,858          2.33

Total assets . . . . . . . 13,417,887 12,960,381 1,972,120             100.0 11,434,607        100.0 11,785,053 1,793,276         100.0 9,757,146           100.0      8,683,712        100.0




                                                                                            128
ASSETS

Loan Portfolio

Borrower concentration


Pursuant to the “Core Indicators of the Risk Management of Commercial Banks (for Trial
Implementation)” promulgated by the CBRC, the maximum loan the Bank may grant to any single
borrower is limited to 10 per cent. of its net capital. The following table sets out, as at 30 June 2010,
the Bank’s loan exposure in terms of outstanding loan balances to its top 10 single borrowers, all of
which were classified as performing loans:


                                                             Unit: In RMB/USD millions, except for percentages

                                                                                           As at 30 June 2010

                                                                                 Amount           Amount         % of total
Item                                      Industry                               (RMB)             (USD)           loans


Borrower   Transportation, storage and postal services
              A                                                                      22,861            3,479               0.4
Borrower   Transportation, storage and postal services
              B                                                                      22,334            3,398               0.4
Borrower   Transportation, storage and postal services
              C                                                                      22,153            3,371               0.3
Borrower   Transportation, storage and postal services
              D                                                                      19,617            2,985               0.3
Borrower   Transportation, storage and postal services
              E                                                                      18,424            2,803               0.3
Borrower   Transportation, storage and postal services
              F                                                                      14,790            2,251               0.2
           Water, environment and public utility
Borrower G management                                                                14,037            2,136               0.2
           Production and supply of electricity, gas and
Borrower H water                                                                     13,217            2,011               0.2
Borrower I Mining                                                                    13,000            1,978               0.2
Borrower J Transportation, storage and postal services                               12,567            1,912               0.2
Total . . . . .                                                                     173,000           26,325               2.7


Note:


(1)     The percentage of loan amount with respect to the Bank’s net capital base (core capital plus supplementary capital less
        deductions) was calculated according to CBRC’s statutory requirements. No proposed dividend distribution was deducted
        from the net capital base.




                                                             129
Distribution of loans by remaining maturity

Of the total advances to customers, 35.4 per cent. had a remaining maturity of more than five years
as at 30 June 2010. The following table sets out a summary of the Bank’s total loans to customers by
remaining maturity as at the dates indicated.


                                                                                           Unit: In RMB/USD millions, except for percentages

                                                   As at 30 June                                                                 As at 31 December

                                          2010                               2009                             2009                               2008                          2007

Remaining maturity           Am ount    Am ount    Percentage      Am ount    Percentage         Am ount    Am ount    Percentage      Am ount    Percentage         Am ount    Percentage

                             (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)            (%)
Impaired or
   overdue (1)     . . . .     90,667     13,796             1.4    110,936                2.0     95,442     14,523             1.7    115,742                2.5   122,308                 3.0

Less than 1 year . . . 2,170,439        330,266             34.2 2,162,350                39.8 2,089,594    317,964             36.5 1,916,991                42.0 1,760,563                43.2
1-5 years      . . . . . . 1,843,874    280,574             29.0 1,501,188                27.6 1,633,587    248,575             28.5 1,202,882                26.3 1,066,759                26.2

Over 5 years       . . . . 2,249,404    342,281             35.4 1,661,995                30.6 1,910,003    290,636             33.3 1,336,379                29.2 1,123,599                27.6

Total   . . . . . . . . 6,354,384       966,917          100.0 5,436,469              100.0 5,728,626       871,698         100.0 4,571,994               100.0 4,073,229               100.0




Note:


(1)      The overdue loans refer to the loans of which principal or interest has become overdue. For loans repaid on an instalment
         basis, only the amount which is not repaid upon maturity date is deemed overdue.


Distribution of loans by collateral


Of the Bank’s total loan portfolio as at 30 June 2010, 67.4 per cent. of its loans are collateralised, the
majority of loans (40.4 per cent.) being secured by mortgages. The following table sets out the
distribution of the Bank’s loan portfolio as at the indicated dates:

                                                                                           Unit: In RMB/USD millions, except for percentages

                                                   As at 30 June                                                                 As at 31 December

                                          2010                               2009                             2009                               2008                          2007

Item                         Am ount    Am ount    Percentage      Am ount    Percentage         Am ount    Am ount    Percentage      Am ount    Percentage         Am ount    Percentage

                             (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)            (%)
Loans secured by
   mortgages       . . . . 2,567,093    390,623             40.4 1,913,931                35.2 2,191,909    333,533             38.3 1,688,435                36.9 1,519,748                37.3

Including:
Personal housing
   loans (1)     . . . . . 1,037,764    157,912             16.3   698,842                12.9   874,244    133,030             15.3   597,374                13.1   536,331                13.2
Pledged loans . . . .        704,019    107,127             11.1   876,019                16.1   786,739     119,714            13.7   676,129                14.8   575,598                14.1

Including:
Discounted bills (1) . .     193,900      29,505             3.1   469,096                 8.6   329,792      50,183             5.8   326,315                 7.1   252,103                 6.2

Guaranteed loans . . . 1,011,604        153,931             15.9   927,517                17.1   933,853    142,100             16.3   866,129                18.9   836,476                20.6

Unsecured loans . . . 2,071,668         315,236             32.6 1,719,002                31.6 1,816,125    276,351             31.7 1,341,301                29.4 1,141,407                28.0

Total . . . . . . . . 6,354,384         966,917          100.0 5,436,469              100.0 5,728,626       871,698         100.0 4,571,994               100.0 4,073,229               100.0




Note:


(1)      Data for domestic branches.




                                                                                           130
Distribution of loans by business line

Corporate loans constitute the largest portion of the Bank’s loan portfolio. As at 30 June 2010,
corporate loans accounted for 69.0 per cent. of the Bank’s total loans. Personal loans accounted for
22.9 per cent. of its total loans but this is gradually rising year-on-year as the Bank has, in recent
years, proactively adjusted its loan structure in order to strategically support the growth of personal
loans. The following table sets out the distribution of the Bank’s loans to customers (on a consolidated
basis) by business line as at the indicated dates:

                                                                                                   In RMB/USD millions, except for percentages

                                                As at 30 June                                                                 As at 31 December

                                       2010                               2009                             2009                               2008                          2007

Item                       Am ount   Am ount                    Am ount                       Am ount    Am ount                    Am ount                       Am ount

                           (RMB)      (US$)        (%)          (RMB)            (%)          (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)            (%)
Loans of domestic
    operations . . . . 6,036,262     918,510             95.0 5,248,539                96.5 5,494,428    836,061             95.9 4,387,759                96.0 3,919,209                96.2

Corporate loans . . . . 4,384,464    667,163             69.0 3,811,537                70.1 3,957,786    602,238             69.1 3,232,102                70.7 2,914,993                71.6

Discounted bills . . .     193,900     29,505             3.1   469,096                 8.6   329,792      50,183             5.7   326,315                 7.1   252,103                 6.2

Personal loans . . . . 1,457,898     221,842             22.9   967,906                17.8 1,206,850    183,641             21.1   829,342                18.2    752,113               18.4
Overseas and
    others 4   . . . . .   318,122     48,407             5.0   187,930                 3.5   234,198      35,637             4.1   184,235                 4.0   154,020                 3.8
Total . . . . . . . . 6,354,384      966,917          100.0 5,436,469              100.0 5,728,626       871,698         100.0 4,571,994               100.0 4,073,229               100.0



Analysis of corporate loans

Distribution by maturity

The majority of the Bank’s corporate loans are medium- to long-term loans, accounting for 70.9 per
cent. of its total corporate loans as at 30 June 2010. The majority of its short-term loans (accounting
for 29.1 per cent. of the total corporate loans as at 30 June 2010) are working capital loans.

Distribution by product line

Project loans constitute the biggest portion of the Bank’s corporate loans, accounting for 56.1 per cent.
of its total corporate loans as at 30 June 2010. The following table sets out the distribution of its
corporate loans to customers (on a consolidated basis) by product line as at the indicated dates:

                                                                                        Unit: In RMB/USD millions, except for percentages

                                                As at 30 June                                                                 As at 31 December

                                       2010                               2009                             2009                               2008                          2007

Item                       Am ount   Am ount    Percentage      Am ount    Percentage         Am ount    Am ount    Percentage      Am ount    Percentage         Am ount    Percentage

                           (RMB)      (US$)        (%)          (RMB)            (%)          (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)            (%)
Working capital loans . 1,391,738     211,774            31.7 1,274,388                33.4 1,265,782    192,608             32.0 1,208,683                37.4 1,201,582                41.2

Of which:
    Trade finance . . .    388,775     59,158             8.9   218,818                 5.7    311,354     47,377             7.9   122,152                 3.8     87,000                3.0

Project loans . . . . . 2,460,807    374,449             56.1 2,131,298                56.0 2,254,893     343,116            57.0 1,681,445                52.0 1,414,000                48.5
Property loans . . . .     531,919     80,940            12.2   405,851                10.6    437,111     66,513            11.0   341,974                10.6    299,411               10.3

Total . . . . . . . . 4,384,464      667,163          100.0 3,811,537              100.0 3,957,786       602,238         100.0 3,232,102               100.0 2,914,993               100.0




4
         “Overseas and others” includes overseas branches and domestic and overseas subsidiaries.



                                                                                        131
Distribution by industry

A considerable portion of the Bank’s loans are accounted for by the following industries: (i)
manufacturing; (ii) transportation, storage and postal services; (iii) production and supply of
electricity, gas and water; and (iv) water, environment and public utility management, accounting for
19.4 per cent., 20.5 per cent., 12.5 per cent. and 12.6 per cent., respectively, as at 30 June 2010. Of
these industries, the latter three historically have a substantially lower NPL ratio than is average for
the Bank’s corporate loans and therefore lending to these industries provides satisfactory risk adjusted
returns.

The following table sets out the distribution of the Bank’s corporate loans to customers (on a
consolidated basis) by industry as at the indicated dates:


                                                                                       Unit: In RMB/USD millions, except for percentages

                                                         As at 30 June                                                       As at 31 December

                                                2010                          2009                          2009                       2008                   2007

Item                               Amount       AmountPercentage         Amount   Percentage   Amount       AmountPercentage     Amount    Percentage    Amount   Percentage

                                   (RMB)         (US$)       (%)         (RMB)        (%)      (RMB)         (US$)     (%)        (RMB)          (%)     (RMB)        (%)
Transportation, storage and
    postal services      . . . .     896,999     136,492       20.5        781,668      20.5     800,244     121,769    20.2         690,809      21.4     602,103      20.7
Manufacturing        . . . . . .     848,494     129,111       19.4        801,295      21.0     793,233     120,703    20.0         758,764      23.5     738,121      25.3

    Chemicals        . . . . . .     136,539      20,776         3.1       133,003       3.5     133,243      20,275     3.4         124,981       3.9     121,243       4.1
    Machinery        . . . . . .     120,871      18,392         2.8       105,235       2.7     106,198      16,160     2.7         102,747       3.2      95,709       3.3
    Metal processing       . . .     105,016      15,980         2.4        87,177       2.3      95,682      14,559     2.4          79,876       2.5      77,808       2.7

    Textiles and apparels . .         89,498      13,618         2.0        83,010       2.2      84,590      12,872     2.1          78,072       2.4      79,112       2.7

    Iron and steel . . . . .          87,796      13,360         2.0        90,234       2.4      83,816      12,754     2.1          87,686       2.7      84,357       2.9
    Transportation equipment          47,037       7,157         1.1        45,754       1.2      44,522       6,775     1.1          46,888       1.4      42,496       1.4

    Telecommunications
        equipment, computer
        and other electronic
        equipment . . . . .           43,331       6,593         1.0        47,439       1.2      41,067       6,249     1.0          40,831       1.3      43,181       1.5
    Petroleum processing,
        coking and nuclear
        fuel    . . . . . . .         39,414       5,997         0.9        42,243       1.1      38,226       5,817     1.0          41,709       1.3      35,761       1.2

    Non-metallic mineral . .          37,588       5,720         0.9        36,881       1.0      35,471       5,397     0.9          33,591       1.0      30,963       1.1

    Others . . . . . . . .           141,404      21,517         3.2       130,319       3.4     130,418      19,845     3.3         122,383       3.8     127,491       4.4

Production and supply of
    electricity, gas and water       548,581      83,475       12.5        528,318      13.9     531,562      80,885    13.4         501,411      15.5     404,873      13.9

Water, environment and
    public utility
    management         . . . . .     554,699      84,406       12.6        493,483      12.9     510,721      77,714    12.9         275,469       8.5     230,156       7.9

Real estate . . . . . . . .          503,436      76,605        11.5       395,560      10.4     421,804      64,184    10.7         343,895      10.6     303,984      10.4
Leasing and commercial
    services    . . . . . . .        334,065      50,833         7.6       268,020       7.0     290,410      44,190     7.3         188,120       5.8     159,877       5.5

Wholesale, retail and lodging        323,511      49,227         7.4       219,670       5.8     261,261      39,755     6.6         188,831       5.8     186,988       6.4

Construction . . . . . . .            73,122      11,127         1.7        65,078       1.7      62,403       9,496     1.6          61,006       1.9      52,639       1.8
Science, education, culture
    and sanitation . . . . .          70,556      10,736         1.6        72,175       1.9      66,809      10,166     1.7          70,148       2.2      69,742       2.4

Others . . . . . . . . . .           231,001      35,150         5.2       186,270       4.9     219,339      33,376     5.6         153,649       4.8     166,510       5.7

Total . . . . . . . . . .           4,384,464    667,163      100.0       3,811,537    100.0    3,957,786    602,238   100.0       3,232,102     100.0    2,914,993    100.0




                                                                                       132
Analysis of personal loans

Personal housing loans represent the largest proportion of the Bank’s personal loans, accounting for
71.2 per cent. of personal loans as at 30 June 2010. The following table sets out the distribution of
the Bank’s personal loans to customers (on a consolidated basis) by product line as at the indicated
dates:

                                                                                                    In RMB/USD millions, except for percentages

                                                 As at 30 June                                                                 As at 31 December

                                        2010                               2009                             2009                               2008                          2007

Item                       Am ount    Am ount    Percentage      Am ount    Percentage         Am ount    Am ount    Percentage      Am ount    Percentage         Am ount    Percentage

                           (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)            (%)
Personal housing
   loans . . . . . . . 1,037,764      157,912             71.2   698,842                72.2   874,244    133,030             72.4   597,374                72.0   536,331                71.3

Personal consumption
   loans . . . . . . .     209,653      31,902            14.4   123,945                12.8   157,635      23,987            13.1   101,145                12.2     91,066               12.1

Personal business
   loans . . . . . . .     158,618      24,136            10.9   120,781                12.5   138,095      21,013            11.4    113,726               13.7    116,475               15.5
Credit card overdrafts .     51,863      7,892             3.5     24,338                2.5     36,876      5,611             3.1     17,097                2.1      8,241                1.1

Total . . . . . . . . 1,457,898       221.842          100.0     967,906            100.0 1,206,850       183,641         100.0      829,342            100.0       752,113           100.0



Geographical concentration of loan portfolio

As at 30 June 2010, the majority of loans advanced are made to entities and companies located in the
PRC, with approximately 5.0 per cent. of the Bank’s loan portfolio consisting of loans for use by
overseas branches and domestic and overseas subsidiaries.

Asset quality of the Bank’s loan portfolio

Five-tier classification of assets

The Bank’s loans and other assets are classified in compliance with CBRC and PBOC guidelines. The
table below sets out the five-tier classification laid down in the PBOC guidelines.

Tier                                                                                              Summary Description
Pass . . . . . . . . . . . . . . . . Borrowers can honour the terms of the contracts, and there is no reason
                                     to doubt their ability to repay principal and interest of loans in full and
                                     on a timely basis.

Special Mention . . . . . . . Borrowers are still able to service the loans currently, although the
                              repayment of loans might be adversely affected by some factors.

Substandard . . . . . . . . . . Account under which the principal and/or interest is overdue for more
                                than 3 months; or for which there is evidence indicating that there are
                                difficulties in recovering the debt; or an overdraft to a debtor without
                                credit line or the facility has been revoked or exceeded or the limit or
                                period of the facility has been exceeded with no crediting of funding for
                                repayment within 3 months.

Doubtful . . . . . . . . . . . . Borrowers cannot pay back principal and interest of loans in full and
                                 significant losses will incur even when guarantees are executed.

Loss . . . . . . . . . . . . . . . . Principal and interest of loans cannot be recovered or only a small
                                     portion can be recovered after taking all possible measures and resorting
                                     to necessary legal procedures.



                                                                                         133
Assets classified as Substandard, Doubtful or Loss are considered non-performing assets (NPAs).
NPAs include loans and receivables, securities and other assets held by the Bank that meet such
classifications. NPLs are a subset of NPAs. The table below sets forth the Bank’s loan classification
(on a consolidated basis) for the periods indicated.


Distribution of loans by five-tier classification

                                                                                        Unit: In RMB/USD millions, except for percentages

                                                As at 30 June                                                                 As at 31 December

                                        2010                              2009                             2009                               2008                          2007

Item                      Am ount    Am ount    Percentage      Am ount    Percentage         Am ount    Am ount    Percentage      Am ount    Percentage         Am ount    Percentage

                          (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)            (%)
Pass . . . . . . . . . 6,041,165      919,256         95.07 5,145,073              94.64 5,411,226       823,401         94.46 4,229,609               92.51 3,728,576               91.54

Special Mention . . .      233,146     35,477            3.67   192,731                3.55   228,933      34,836            4.00   237,903                5.20   232,879                5.72

Non-performing loans .      80,073     12,184            1.26     98,665               1.81     88,467     13,462            1.54   104,482                2.29    111,774               2.74

Substandard . . . . .       25,971      3,952            0.41     40,823               0.75     31,842      4,845            0.55    37,694                0.83    38,149                0.94
Doubtful . . . . . . .      42,003      6,391            0.66     48,577               0.89     43,413      6,606            0.76    55,641                1.22    62,042                1.52

Loss . . . . . . . . .      12,099      1,841            0.19      9,265               0.17     13,212      2,010            0.23     11,147               0.24     11,583               0.28

Total . . . . . . . . 6,354,384       966,917        100.00 5,436,469              100.0 5,728,626       871,698        100.00 4,571,994              100.00 4,073,229              100.00



As at 30 June 2010 and 30 September 2010, the Bank’s ratio of NPLs to total loans (the NPL ratio)
amounted to 1.26 per cent. and 1.15 per cent., respectively, compared to 1.54 per cent. at 31 December
2009 and its coverage ratio improved from 164.41 per cent. as at 31 December 2009 to 189.81 per cent.
and 210.16 per cent. as at 30 June 2010 and 30 September 2010, respectively, evidencing an
improvement in the Bank’s asset quality.

Overdue loans


The following table sets out the status of the Bank’s overdue loans as at the dates indicated:


                                                                                        Unit: In RMB/USD millions, except for percentages

                                                As at 30 June                                                                 As at 31 December

                                        2010                              2009                             2009                               2008                          2007

Overdue Periods          Am ount (1) Am ount (1) Percentage     Am ount    Percentage Am ount (1) Am ount (1) Percentage Am ount (1) Percentage Am ount (1) Percentage

                          (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)       (US$)        (%)          (RMB)            (%)          (RMB)            (%)
3 to 6 months . . . .        4,452        677             0.1     10,598                0.2      4,175       635              0.1      9,231                0.2      4,631                0.1

6 to 12 months . . . .       5,128        780             0.1     13,096                0.2     11,090      1,688             0.2      8,487                0.2    10,150                 0.3

Over 12 months . . .        62,640      9,532             1.0     62,691                1.2     61,823      9,407             1.1     70,162                1.5     86,771                2.1

Total . . . . . . . .       72,220     10,989             1.2     86,385                1.6    77,088      11,730             1.4    87,880                 1.9   101,552                 2.5




Note:


(1)     Loans to customers are deemed overdue when either the principal or interest is overdue.




                                                                                         134
Allowance for Impairment Losses

The following table summarises the changes in the Bank’s impairment allowances on loans and
advances for the years specified:


                                                                                                Unit: In RMB/USD millions, except for percentages

                                           January to June 2010                              2009                                      2008                                      2007

                                     Individually Collectively               Individually Collectively                 Individually Collectively                 Individually Collectively
Items                                 Assessed       Assessed     Total       Assessed       Assessed       Total       Assessed       Assessed       Total       Assessed       Assessed       Total

At the beginning of the
      period/year       . . . . .         45,500        99,952    145,452         54,059        81,924      135,983         58,944        56,743      115,687         56,991        40,202       97,193

Charge for the period/year .               (1,039)      10,782      9,743           3,179       18,503       21,682         10,955        25,557       36,512         15,928        17,133       33,061
Including:

      Impairment allowances
          charged       . . . . .           4,551       40,202     44,753         20,056        61,557       81,613         25,045        54,683       79,728         36,869        38,439       75,308

      Impairment allowances
          transferred     . . . .             24           (24)        —             242            (242)        —             443            (443)        —             371            (371)        —

      Reversal of impairment
          allowances . . . .               (5,614)      (29,396) (35,010)         (17,119)      (42,812) (59,931)           (14,533)      (28,683) (43,216)           (21,312)      (20,935) (42,247)

      Accreted interest on
          impaired loans       . .           (506)          —        (506)         (1,021)            —      (1,021)         (1,538)            —      (1,538)         (1,430)            —      (1,430)
Write-offs . . . . . . . .                 (3,333)        (213)    (3,546)        (11,259)          (607) (11,866)          (11,917)          (456) (12,373)           (7,579)          (592)    (8,171)

Recoveries of loans
      previously written off     .           417            67       484             774            142        916              83            146        229             295              —        295
Transfer in from
      acquisition/ (Transfer
      out) . . . . . . . . .                 228           135       363             (232)           (10)      (242)         (2,468)           (66)    (2,534)         (5,261)            —      (5,261)

At the end of the
      period/year       . . . . .         41,267       110,723    151,990         45,500        99,952      145,452         54,059        81,924      135,983         58,944        56,743      115,687




In the first half of 2010 and the years 2009, 2008 and 2007, the charge for the period/year were
RMB9,743 million, RMB21,682 million, RMB36,512 million and RMB33,061 million (USD1,483
million, USD3,299 million, USD5,556 million and USD5,031 million), respectively.

The amount of provision in 2009 was lower than that of 2008. The main reason for this is that the large
amount of reversal of impairment allowance in 2009 partly offsets the amount of provision increased
in the year. The main reasons for the increase in the amount of reversal of impairment allowance of
the Bank are that the loans for which provisions for impairment losses have been made in previous
years are upgraded due to the obvious reduction of risks and that the Bank has greatly strengthened
its collection of NPLs.

Investment in Securities

The investment portfolio of the Bank consists of listed and unlisted Renminbi and foreign currency
denominated securities and other financial assets. The securities held by the Bank are classified into
(1) securities not related to restructuring, (2) securities related to restructuring, and (3) equity
instruments. Securities related to restructuring were generated from the financial restructuring of the
Bank in 2005 and the disposal of non-performing assets in previous years, which mainly consisted of
the Huarong bonds, special government bonds, MOF receivables and special PBOC bills. 5



(5)
           For more information in relation to the Bank’s restructuring, see “Description of the Bank”.



                                                                                                135
Unless the context otherwise requires, the amount of investment referred to in this section represents
net investment amount after deduction of the provision for impairment loss for the investment.

As at 30 June 2010, the total amount of investment in securities was RMB3,729,253 million
(USD567,463 million), accounting for 28.8 per cent. of the Bank’s total assets. Investment in
securities not related to restructuring accounts for the largest portion of the investment portfolio at
89.1 per cent. of the total investment in securities as at 30 June 2010.

Other

Other components of the Bank’s assets mainly include: (1) cash and balances with the central bank;
(2) due from banks and other financial institutions; (3) reverse repurchase agreements; and (4) interest
receivables.

LIABILITIES

As at 30 June 2010, the Bank’s total liabilities were RMB12,250,781 million (USD1,864,144 million),
representing an increase of 10.3 per cent. compared to the end of 2009. The table below indicates the
structure of the Bank’s liabilities as at the dates specified.


                                                                                        Unit: In RMB/USD millions, except for percentages

                                                      30 June                                                                As at 31 December

                                            2010                        2009                               2009                         2008                        2007

Item                            Amount     Amount Percentage      Amount       Percentage     Amount       Amount Percentage      Amount       Percentage     Amount       Percentage

                                (RMB)      (US$)      (%)         (RMB)           (%)         (RMB)         (US$)     (%)         (RMB)           (%)         (RMB)           (%)
Due to customers . . . . . 10,832,789 1,648,375         88.4       9,533,117         88.2      9,771,277 1,486,849      88.0       8,223,446         89.9      6,898,413         84.7
Due to banks and other
    financial institutions . . 1,100,955    167,527         9.0    1,011,258            9.3    1,001,634    152,414         9.0     646,254             7.0     805,174             9.9

Repurchase agreements     . .      9,100      1,385         0.1        6,877            0.1      36,060       5,487         0.3       4,648             0.1     193,508             2.4
Subordinated bonds . . . .        75,000     11,412         0.6      35,000             0.3      75,000      11,412         0.7      35,000             0.4      35,000             0.4
Others   . . . . . . . . .       232,937     35,445         1.9     227,914             2.1     222,148      33,803         2.0     241,168             2.6     207,941             2.6

Total liabilities   . . . . . 12,250,781 1,864,144     100.0      10,814,166        100.0     11,106,119 1,689,965     100.0       9,150,516        100.0      8,140,036        100.0




Customer deposits have always been the Bank’s main source of funding. For a breakdown of customer
deposits by product type, business line and remaining maturity see “Funding and Capital Adequacy”.




                                                                                        136
                                   PRINCIPAL SHAREHOLDERS

Immediately following the rights issue on 23 December 2010, the Bank had a total of 349,018,545,827
issued and paid-up shares, which consisted of 262,224,501,277 A shares and 86,794,044,550 H shares.

The following persons, as at 22 November 2010, had an interest or short position in the issued and
paid up shares of the Bank:

HOLDER OF A SHARES

                                                                                                         Approximate
                                                                                         Approximate      percentage
                                                  Number of A                             percentage        of total
Name of substantial                               Shares held           Nature of         of issued A        issued
shareholder                   Capacity              (share)             Interests         shares (%)      shares (%)

MOF . . . . . . . . . . . Beneficial owner     118,006,174,032 Long position                     47.02          35.33
Huijin 6 . . . . . . . . . Beneficial owner    118,006,174,032 Long position                     47.02          35.33

HOLDER OF H SHARES

                                                                                                         Approximate
                                                                                         Approximate      percentage
                                                    Number of H                           percentage        of total
Name of substantial                                  Shares held         Nature of        of issued H        issued
shareholder                    Capacity                (share)           Interests        shares (%)      shares (%)

National Council  Beneficial owner                15,774,285,559 Long position                   18.99            4.72
  for Social
  Security Fund
The Goldman Sachs Beneficial owner                10,139,783,324 Long position
  Group, Inc.     Interest of                        159,943,599 Long position
                    controlled
                    corporations
                  Total                           10,299,726,923                                 12.40            3.08
Nomura Holdings,  Interest of                      4,909,233,950 Long position                    5.91            1.47
  Inc.              controlled
                    corporations
                  Interest of                       3,862,033,001 Short position                  4.65            1.16
                    controlled
                    corporations
JPMorgan Chase & Beneficial owner                     419,635,947 Long position
  Co.             Investment                        1,323,428,200 Long position
                    manager
                  Custodian                         2,421,908,503 Long position
                    corporation /
                    approved lending
                    agent
                  Total                             4,164,972,650                                 5.01            1.25
                  Beneficial owner                    359,910,249 Short position                  0.43            0.11
Capital Research  Investment                        5,011,970,000 Long position                   6.03            1.50
  and Management    manager
  Company



6
     According to the register of shareholders as at 22 November 2010, Huijin held 118,316,816,139 shares in the Bank.



                                                        137
                                            MANAGEMENT

Particulars of Directors, Supervisors and Senior Management

Name                                                            Business Address                  Nationality
Executive Directors
Mr. JIANG Jianqing . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng         Chinese
                                                      District, Beijing, PRC, 100140
Mr. YANG Kaisheng . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng            Chinese
                                                      District, Beijing, PRC, 100140
Ms. WANG Lili . . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng        Chinese
                                                      District, Beijing, PRC, 100140
Mr. LI Xiaopeng . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng        Chinese
                                                      District, Beijing, PRC, 100140

Non-executive Directors
Mr. HUAN Huiwu . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng           Chinese
                                                           District, Beijing, PRC, 100140
Mr. GAO Jianhong . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng         Chinese
                                                           District, Beijing, PRC, 100140
Ms. LI Chunxiang . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng         Chinese
                                                           District, Beijing, PRC, 100140
Mr. LI Jun . . . . . . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng   Chinese
                                                           District, Beijing, PRC, 100140
Mr. LI Xiwen . . . . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng     Chinese
                                                           District, Beijing, PRC, 100140
Mr. WEI Fusheng . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng        Chinese
                                                           District, Beijing, PRC, 100140

Independent Non-executive Directors
Mr. LEUNG Kam Chung, Antony . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng                    Chinese
                                                      District, Beijing, PRC, 100140
Mr. QIAN Yingyi . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng        Chinese
                                                      District, Beijing, PRC, 100140
Mr. XU Shanda . . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng        Chinese
                                                      District, Beijing, PRC, 100140
Mr. WONG Kwong Shing, Frank . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng                    Singaporean
                                                      District, Beijing, PRC, 100140
Sir Malcolm Christopher McCARTHY . . . No. 55 Fuxingmennei Avenue, Xicheng                       British
                                                      District, Beijing, PRC, 100140
Mr. Kenneth Patrick CHUNG . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng                British
                                                      District, Beijing, PRC, 100140

Members of the Board of Supervisors
Mr. ZHAO Lin . . . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng       Chinese
                                                       District, Beijing, PRC, 100140
Ms. WANG Chixi . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng         Chinese
                                                       District, Beijing, PRC, 100140
Ms. DONG Juan . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng          Chinese
                                                       District, Beijing, PRC, 100140
Mr. MENG Yan . . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng         Chinese
                                                       District, Beijing, PRC, 100140




                                                      138
Name                                                          Business Address                  Nationality

Mr. ZHANG Wei . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng        Chinese
                                                        District, Beijing, PRC, 1.00140
Mr. ZHU Lifei . . . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng    Chinese
                                                        District, Beijing, PRC, 100140

Other Senior Management Members
Mr. LUO Xi . . . . . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng   Chinese
                                                         District, Beijing, PRC, 100140
Mr. LIU Lixian . . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng     Chinese
                                                         District, Beijing, PRC, 100140
Mr. YI Huiman . . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng      Chinese
                                                         District, Beijing, PRC, 100140
Mr. ZHANG Hongli . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng         Chinese
                                                         District, Beijing, PRC, 100140
Mr. WANG Xiquan . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng          Chinese
                                                         District, Beijing, PRC, 100140
Mr. WEI Guoxiong . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng         Chinese
                                                         District, Beijing, PRC, 100140
Mr. HU Hao . . . . . . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng   Chinese
                                                         District, Beijing, PRC, 100140
Mr. LIN Xiaoxuan . . . . . . . . . . . . . . . . . . No. 55 Fuxingmennei Avenue, Xicheng       Chinese
                                                         District, Beijing, PRC, 100140

BIOGRAPHIES OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Jiang Jianqing, Chairman of the Board of Directors, Executive Director

Mr. Jiang has served as Chairman of the Board of Directors and Executive Director of Industrial and
Commercial Bank of China Limited since October 2005. He joined ICBC in 1984, and was appointed
as President in February 2000. Mr. Jiang previously served in several positions including Vice
President of ICBC Shanghai Branch, President of Shanghai Urban Cooperation Commercial Bank
(now known as Bank of Shanghai), President of ICBC Shanghai Branch and Vice President of ICBC.
At present, he is concurrently Chairman of the board of directors of Industrial and Commercial Bank
of China (Asia) Limited, a member of the Monetary Policy Committee of the People’s Bank of China,
Chairman of China Banking Association, Vice Chairman of China Society for Finance and Banking,
and a tutor to PhD students of Shanghai Jiao Tong University. He graduated from Shanghai University
of Finance and Economics and Shanghai Jiao Tong University, and received a Master’s degree in
Engineering and a Doctorate degree in Management from Shanghai Jiao Tong University.

Yang Kaisheng, Vice Chairman, Executive Director, President

Mr. Yang has served as Vice Chairman of the Board of Directors, Executive Director and President of
Industrial and Commercial Bank of China Limited since October 2005. He joined ICBC in 1985, and
served in several positions including Deputy General Manager of ICBC Discipline Enforcement
Office, General Manager of ICBC Planning and Information Department, President of ICBC Shenzhen
Branch, Vice President of ICBC, President of China Huarong Asset Management Corporation. He
concurrently serves as Consultant of the 17th Committee of China International Economic and Trade
Arbitration Commission. He graduated from Wuhan University with a Doctorate degree in Economics.

Zhao Lin, Chairman of the Board of Supervisors

Mr. Zhao has served as Chairman of the Board of Supervisors of Industrial and Commercial Bank of
China Limited since June 2008. He was appointed as Executive Director and Vice President of China


                                                     139
Construction Bank (CCB) in September 2004, and previously was Vice President of Hubei Branch,
Deputy General Manager and General Manager of the Administrative Office of the Head Office, Chief
Auditor, and Vice President of CCB. He graduated from Zhongnan University of Finance and
Economics and received the Executive Master of Business Administration (EMBA) degree from
Tsinghua University. He is a senior economist.


Wang Lili, Executive Director, Senior Executive Vice President

Ms. Wang has served as Senior Executive Vice President of Industrial and Commercial Bank of China
Limited since October 2005, and Executive Director since April 2010. She was appointed as Vice
President upon joining ICBC in November 2000. She previously served in several positions including
General Manager of the Credit Management Department, General Manager of the Risk Management
Department, and Assistant to President of Bank of China. She has also served as Chairperson of Bank
of China (Canada) and Yien Yieh Commercial Bank Ltd. (Hong Kong), respectively. Currently she is
the PRC’s representative of APEC Business Advisory Council, a member of APEC Women Leaders’
Network, a board member of International Swaps and Derivatives Association, Vice Chairperson of
China Chamber of International Commerce, Vice Chairperson of the Board of Directors of Industrial
and Commercial Bank of China (Asia) Limited, Chairperson of the Board of Directors of ICBC
(London) Limited, Vice Chairperson of China Society of International Finance, Vice Chairperson of
National Debt Association of China, and Non-executive Director of Hong Kong Mercantile Exchange.
She graduated from Nankai University and received an MBA degree in International Finance from
University of Birmingham, UK.

Li Xiaopeng, Executive Director and Senior Executive Vice President


Mr. Li has served as Senior Executive Vice President of Industrial and Commercial Bank of China
Limited since October 2005, and Executive Director since October 2010. He joined ICBC in 1984, and
was appointed as Vice President of ICBC in September 2004. He previously served in several positions
including Vice President of ICBC Henan Branch, General Manager of the Banking Department of
ICBC Head Office, President of ICBC Sichuan Branch, Vice President of China Huarong Asset
Management Corporation, and Assistant to President of ICBC and President of ICBC Beijing Branch.
He is concurrently serving as Chairman of the board of ICBC Credit Service Asset Management Co.,
Ltd., Chairman of Industrial and Commercial Bank of China (Almaty) Joint Stock Company, Chairman
of Industrial and Commercial Bank of China (Middle East) Limited, Chairman of ICBC Financial
Leasing Co., Ltd., Vice Chairman of China Urban Financial Society, Vice Chairman of China Society
of Agricultural Finance, and Head of the Financial Leasing Committee and the Development and
Research Committee of China Banking Association. He graduated from Zhengzhou University and
received a Doctorate degree in Economics from Wuhan University.




                                                140
Huan Huiwu, Non-executive Director

Mr. Huan has served as Non-executive Director of Industrial and Commercial Bank of China Limited
since February 2009. He joined the MOF in 1982, and served as Chief of the Cadre Deployment
Division of the Department of Human Resources, Chief of the Cadre Deployment Division of the
Department of Human Resources and Education, Deputy Director-General of the Department of
Human Resources and Education, and Executive Deputy Secretary of the Party Committee (at the rank
of Director-General). He graduated from the Party School of the Central Committee of the Communist
Party of China as a postgraduate in Economics and Administration.

Gao Jianhong, Non-executive Director

Mr. Gao has served as Non-executive Director of Industrial and Commercial Bank of China Limited
since December 2008. He joined Central Huijin Investment Ltd. in 2005 and previously served as
Deputy Chief of the Finance Division of Macro-economic Control Department of the State
Commission for Restructuring Economy, Deputy Chief of the Investment Business Department of
China Development Bank, Deputy General Manager of the International Business Department of
Everbright Securities Co., Ltd., and Senior Manager and research analyst of the Securities Offering
Division of the Investment Banking Department of China Galaxy Securities Co., Ltd. He graduated
from Peking University, and subsequently pursued advanced studies in the Graduate School of the
People’s Bank of China and University of Reading in England, and he received a Master’s degree in
Economics and a degree of Master of Science in International Securities and Investment Banking.

Li Chunxiang, Non-executive Director

Ms. Li has served as Non-executive Director of Industrial and Commercial Bank of China Limited
since February 2009. She joined the MOF in 1982, and served in several positions including Chief of
the Township Finance Division of the Local Department and Chief of the Office of the Foreign
Exchange and Foreign Affairs Department. In 1999, she joined the State Agricultural Comprehensive
Development Office, and served as Chief of the Finance Planning Division and Assistant Inspector (at
the rank of Deputy Director-General) of the State Agricultural Comprehensive Development Office.
She graduated from Dongbei University of Finance and Economics with a Bachelor’s degree.

Li Jun, Non-executive Director

Mr. Li has served as Non-executive Director of Industrial and Commercial Bank of China Limited
since December 2008. He previously served as Assistant Representative of Beijing Representative
Office of the Bank of Credit and Commerce International, Deputy Representative of BNP Paribas
China Representative Office, Consultant of the International Banking Department of Banco Bilbao
Vizcaya Argentaria (BBVA), Deputy General Manager of the Research Centre of China Technology
Trust and Investment Company, General Manager of the Research Department of China Sci-Tech
Securities, and Professor of the Finance Department of the School of Economics and Management of
the University of Science and Technology Beijing. At present, he serves in Central Huijin Investment
Ltd.. He graduated from University of Madrid in Spain and received a Doctorate degree in Business
Management.

Li Xiwen, Non-executive Director

Mr. Li has served as Non-executive Director of Industrial and Commercial Bank of China Limited
since December 2008. He previously served as Chief of the Finance and Investment Division of the
Planning Department, Deputy General Manager of the Fund Planning Department, General Manager
of the Credit Card Department, Vice President of Shandong Branch, General Manager of the Credit
Risk Management Department of the Head Office, Vice Chairman of the Risk and Internal Control


                                                141
Management Committee of the Head Office, President of Gansu Branch, and General Manager of the
Compliance Department of the Head Office. At present, he serves in Central Huijin Investment Ltd.,
and concurrently as Deputy Secretary-General of China Society for Finance and Banking and
Executive Director of China Investment Society. He graduated from Hubei Finance and Economics
College and received a Bachelor’s degree in Economics. He is a senior economist.

Wei Fusheng, Non-executive Director

Mr. Wei has served as Non-executive Director of Industrial and Commercial Bank of China Limited
since February 2009. He joined Xinhua News Agency in 1994, and served as Chief of the Economics
Department of Macau Branch. He was transferred to the MOF in 1996, and served as Chief of the
Education Division and Chief of the Policy and Legislation Division in the Cultural and Educational
Department, Chief of the Policy and Legislation Division of the Public Expenditure Department, and
Assistant Inspector (at the rank of Deputy Director-General). He graduated from Tianjin Finance and
Economics College with a Bachelor’s degree.

Leung Kam Chung, Antony, Independent Non-executive Director

Mr. Leung has served as Independent Non-executive Director of Industrial and Commercial Bank of
China Limited since October 2005. He is currently Chairman of the Greater China operations of
Blackstone Group (China) and Chairman and Senior Executive Director of Blackstone Group (Hong
Kong). He was Financial Secretary of Hong Kong from 2001 to 2003. He was also Chairman of the
Asia-Pacific Region of JPMorgan Chase Bank and worked for Citicorp. He had been Regional Chief
of the Treasury Department, Corporate Banking Department, Investment Banking Department and
Private Banking Department of Citibank in Hong Kong, Singapore, Manila and New York. Mr. Leung
graduated from The University of Hong Kong.

Qian Yingyi, Independent Non-executive Director

Mr. Qian has served as Independent Non-executive Director of Industrial and Commercial Bank of
China Limited since October 2005. He had taught at the Department of Economics at Stanford
University and University of Maryland, and served as Independent Non-executive Director of China
Netcom Group Corporation (Hong Kong) Limited. He is a Professor in Department of Economics at
the University of California, Berkeley and Dean of the School of Economics and Management of
Tsinghua University. Concurrently, he is the Chairman of the Board of Supervisors of Vtion Wireless
Technology AG. He graduated from Tsinghua University and received a Doctorate degree in
Economics from Harvard University.

Xu Shanda, Independent Non-executive Director

Mr. Xu has served as Independent Non-executive Director of Industrial and Commercial Bank of
China Limited since September 2007. From January 2000 to 2007, he was appointed as Deputy
Commissioner of the State Administration of Taxation (SAT). He worked as Deputy Director-General
of the Tax System Reformation Department of SAT, Deputy Director-General and Director-General of
the Policy and Legislation Department of SAT, Director-General of Local Taxes Department of SAT,
and Director-General of Supervisory Bureau of SAT. He is currently member of the National
Committee of the Chinese People’s Political Consultative Conference, Chairman of the China
Certified Tax Agents Association, member of the Auditing Standards Commission of the Chinese
Institute of Certified Public Accountants, member of the Accounting Standards Commission of the
MOF, consultant to the China Public Finance Society, member of the Chinese Economist 50 Forum and
member of the Academic Committee. He is the Independent Director of China Pacific Insurance
(Group) Co., Ltd., part-time professor and invited researcher of Tsinghua University, Peking
University, National School of Administration, Xi’an Jiaotong University, University of Science &


                                               142
Technology of China, Nankai University, Central University of Finance and Economics and Zhejiang
Engineering University. He received his Bachelor’s degree from the Department of Automation,
Tsinghua University, Master’s degree in Agricultural Economics & Management from the Chinese
Academy of Agricultural Sciences, and Master’s degree in Finance from the University of Bath in UK.


Wong Kwong Shing, Frank, Independent Non-executive Director

Mr. Wong has served as Independent Non-executive Director of Industrial and Commercial Bank of
China Limited since January 2009. Since November, 2010, he has served as an Independent
Non-executive Director of Mapletree Investments Pte Ltd. He previously held a number of senior
positions with regional responsibility at financial institutions including Citibank, JPMorgan and
NatWest, and took positions as Chairman of Hong Kong Futures Exchange Limited, Chairman of the
Leveraged Foreign Exchange Trading Ordinance Arbitration Panel and a member of the Foreign
Exchange and Money Market Practices Committee of Hong Kong Association of Banks. He joined
DBS Bank in 1999, and served as Vice Chairman of DBS Bank Ltd., Director and Chief Operating
Officer of DBS Bank Ltd. and DBS Group Holdings, and Chairman of DBS Bank (Hong Kong) and
Chairman of DBS Bank (China). He also served as the Independent Non-executive Director of the
National Healthcare Group Pte Ltd. under the Ministry of Health of Singapore. At present, he is a
Non-executive Director of PSA International Pte Ltd. and an Independent Non-executive Director of
China Mobile Limited, and a member of the University Court of The University of Hong Kong.

Malcolm Christopher McCarthy, Independent Non-executive Director

Sir M.C. McCarthy has served as Independent Non-executive Director of Industrial and Commercial
Bank of China Limited since December 2009.

He worked as an economist for ICI before joining the UK Department of Trade and Industry where
he held various posts from economic adviser to undersecretary. He subsequently worked as an
investment banker for Kleinwort Benson and Barclays Bank, acting as the senior executive for the
latter first in Japan and then North America. He previously served as Chairman and Chief Executive
Officer of Ofgem and Chairman of the Financial Services Authority (FSA). Currently Sir M.C.
McCarthy serves as a non-executive director of HM Treasury, and also Chairman of the board of
directors of J.C. Flowers & Co. UK Ltd., a non-executive director of Intercontinental Exchange,
Trustee of Said Business School and Governor of University of Greenwich. He is also an Honorary
Fellow of Merton College, an Honorary Doctor of the University of Stirling, and a Freeman of the City
of London. Sir M.C. McCarthy was a MA History at Merton College of Oxford University, PhD
Economics of Stirling University, and MS Business at Graduate School of Business of Stanford
University.

Kenneth Patrick Chung, Independent Non-executive Director

Mr. Chung has served as Independent Non-executive Director of Industrial and Commercial Bank of
China Limited since December 2009. He joined Deloitte Haskins and Sells London Office in 1980. Mr.
Chung became a partner of PricewaterhouseCoopers in 1992, and was a financial service specialist of
PricewaterhouseCoopers (Hong Kong and Mainland China) since 1996. He was the human resources
partner of PricewaterhouseCoopers (Hong Kong), the responsible partner of the audit department of
PricewaterhouseCoopers (Hong Kong and Mainland China), the global responsible partner of the audit
engagement team for Bank of China Limited, the honorary treasurer of Community Chest of Hong
Kong, and was a member of the Ethics Committee, Limitation of Professional Liability Committee and


                                                143
Communications Committee, and the Investigation Panel of the Hong Kong Institute of Certified
Public Accountants. Mr. Chung has also served as the audit partner for the restructurings and initial
public offerings of Bank of China Limited, Bank of China (Hong Kong) Limited and Bank of
Communications Co., Ltd. Currently, Mr. Chung serves as the honorary treasurer of International
Social Service Hong Kong Branch. He is a member of the Institute of Chartered Accountants in
England and Wales, a practising member of the Hong Kong Institute of Certified Public Accountants
and a member of the Macau Society of Certified Practising Accountants. He received his Bachelor’s
degree in Economics from the University of Durham.

Wang Chixi, Shareholder Supervisor

Ms. Wang has served as Supervisor of Industrial and Commercial Bank of China Limited since
October 2005. In 2003, she was appointed as full-time Supervisor (at the rank of Director-General)
and General Manager of the Board of Supervisors’ Office of ICBC as designated by the State Council.
She joined ICBC in 2005. She had taken several positions including Deputy Director-General of the
Financial Audit Department of the National Audit Office, Deputy Director-General of the Agricultural,
Forestry and Sea Products Audit Bureau and was appointed as full-time Supervisor (at the rank of
Director-General) and General Manager of the Board of Supervisors’ Office of Agricultural Bank of
China as designated by the State Council. She graduated from Shenyang Agricultural College, and is
a PRC Certified Public Accountant (as a non-practising member).

Dong Juan, External Supervisor

Ms. Dong has served as External Supervisor of Industrial and Commercial Bank of China Limited
since May 2009. She is currently Chairperson of the Board of Directors of Grandchina International
Consulting Co., Ltd. She previously served as Deputy Chief and Chief of the Foreign Trade Division
of Commerce and Trade Department of the MOF, as Director-General of the Enterprise Affairs
Department of the State Administration of State-owned Assets, as Director-General of the Evaluation
Department of the MOF, and as the independent director of The Ming An (Holdings) Company Limited
and Sinotex Investment & Development Co., Ltd. At present, Ms. Dong concurrently serves as an
independent director of Shanghai Qiangsheng Holding Co., Ltd. and Pioneer Investment Co., Ltd. Ms.
Dong graduated from Shanxi Finance and Economics Institute and from Dongbei University of
Finance and Economics with a Master’s degree in Economics. Ms. Dong is also a PRC Certified Public
Accountant (as a non-practising member).

Meng Yan, External Supervisor

Mr. Meng has served as External Supervisor of Industrial and Commercial Bank of China Limited
since May 2009. Currently, he is the Dean, Professor and Tutor to doctoral students in the School of
Accountancy of Central University of Finance and Economics (CUFE). He is also an Executive
Council Member of the Accounting Society of China, a Council Member of the China Audit Society,
an Executive Council Member of the Banking Accounting Society of China, a member of the Steering
Committee on Teaching and Learning of Business Administration Disciplines of Higher Education
Institutions under the Ministry of Education, and a member of the National Accounting Master
Education Steering Committee. Mr. Meng served as Head of the Department of Accountancy of CUFE.
He was also the Expert Consultant of the Accounting Standards Committee of the MOF for accounting
standards, the Expert Consultant of the MOF for independent auditing standards, and an Expert
Consultant of the MOF for enterprise performance evaluation and an independent director of Beijing
North Star Company Limited. At present, he concurrently serves as an independent director of China
Merchants Property Development Co., Ltd., Yantai Wanhua Polyurethane Co., Ltd., Beijing Bashi
Media Co., Ltd. and Jolimark Holdings Limited. Mr. Meng obtained his Doctorate degree in
Economics from the Research Institute for Fiscal Science of the MOF.


                                                144
Zhang Wei, Employee Supervisor

Mr. Zhang has served as Employee Supervisor of Industrial and Commercial Bank of China Limited
since August 2006. He joined ICBC in 1994, and has served as General Manager of ICBC Legal Affairs
Department since 2004. Currently, he is also Vice Chairman and Arbitrator of the Finance Committee
of China International Economic and Trade Arbitration Commission, Vice Chairman of the Banking
Law Research Institute and an executive council member of the Securities Law Research Institute of
China Law Society, a council member of China Society for Finance and Banking and a professor of
China University of Political Science and Law. He graduated from Peking University with a Doctorate
degree in Law and is a research fellow.

Zhu Lifei, Employee Supervisor

Mr. Zhu has served as the Employee Supervisor of Industrial and Commercial Bank of China Limited
since September 2010. He joined ICBC in 1984 and has served the Executive Deputy General Manager
of the Working Committee of the Bank’s Trade Union since 2010. He has previously served in several
positions including Vice President of ICBC Heilongjiang Branch, President of ICBC Anhui Branch,
President of ICBC Heilongjiang Branch and President of ICBC Liaoning Branch. He graduated from
Northeast Institute of Technology and is a senior economist.

Luo Xi, Senior Executive Vice President

Mr. Luo has served as Senior Executive Vice President of Industrial and Commercial Bank of China
Limited since December 2009. He joined Agricultural Bank of China (ABC) in December 1987, and
was appointed as Assistant to President and General Manager of the International Department in
January 2002, Vice President of ABC in March 2004, and Executive Director and Vice President of
Agricultural Bank of China Limited in January 2009. He previously served several positions including
Assistant to President of ABC Hainan Branch and General Manager of Agricultural Bank of China
Hainan Trust Investment Company, Vice President of ABC Hainan Branch, Vice President of ABC
Fujian Branch, General Manager of ABC Assets Preservation Department, General Manager of ABC
Asset Risk Supervision Department, General Manager of ABC International Department and Chairman
of the Board of Directors of China Agricultural International Finance Co., Ltd. in Hong Kong and
Chairman of Hainan International Finance Co., Ltd. He is concurrently the Chairman of ZAO
Industrial and Commercial Bank of China (Moscow) and Industrial and Commercial Bank of China
(Canada) Limited, an Executive Director of China Society of Agricultural Finance and Vice Chairman
of China Society of International Finance. He graduated from the Graduate School of the People’s
Bank of China and received a Master’s degree in Economics.

Liu Lixian, Secretary of Party Discipline Committee

Mr. Liu has served as Secretary of Party Discipline Committee of Industrial and Commercial Bank of
China Limited since October 2005. He was appointed as Deputy Chief Officer of China Huarong Asset
Management Corporation in September 2003, and joined ICBC in 2005. He previously served in
several positions including Deputy Director of the Bribery and Corruption Inspection Department,
Deputy Commissioner of the General Bureau of Anti-bribery and Corruption, Commissioner of the
Inspection Technology Bureau, and Director of the Inspection Theory Research Institute of the
Supreme People’s Procuratorate. He graduated from Jilin University.

Yi Huiman, Senior Executive Vice President

Mr. Yi has served as Senior Executive Vice President of Industrial and Commercial Bank of China
Limited since July 2008. He joined ICBC in 1985, and was appointed as member of the Senior
Management in October 2005. He served in several positions at ICBC including Vice President of


                                                145
Zhejiang Branch, Vice President and President of Jiangsu Branch, and President of Beijing Branch. He
is concurrently the Chairman of Industrial and Commercial Bank of China (Thai) Public Company
Limited and Industrial and Commercial Bank of China (Malaysia) Berhad. He obtained a Master’s
degree in Executive Business Administration from Guanghua School of Management of Peking
University.

Zhang Hongli, Senior Executive Vice President

Mr. Zhang has served as Senior Executive Vice President of Industrial and Commercial Bank of China
since May 2010. Previously, he had been serving as a member of the Global Banking Management
Committee and Head of Asia-Pacific of Deutsche Bank Global Banking and Chairman of Deutsche
Bank (China) Co., Ltd. since October 2004. He worked as Financial Manager at the headquarters of
Hewlett-Packard from July 1991, a Director and the Head of the PRC operations of Schroders PLC
from July 1994, an Executive Director of Goldman Sachs Asia and the Chief Representative of
Goldman Sachs (China) LLC Beijing Representative Office from June 1998, and Head of Deutsche
Bank Investment Banking Greater China, Vice Chairman of Deutsche Bank Asia and Chairman of
Deutsche Bank China from March 2001 to September 2004. He is concurrently the Chairman of ICBC
International and Vice Chairman of Standard Bank Group Limited (SBG). Mr. Zhang received a
Bachelor’s degree from Heilongjiang Bayi Agricultural University and a Master’s degree in Plant
Genetics from the University of Alberta, Canada, as well as a Master’s degree in Business
Administration (MBA) from the Santa Clara University in California, USA.

Wang Xiquan, Senior Management and General Manager of the Human Resource Department

Mr. Wang has served as a member of the Senior Management and the General Manager of the Human
Resource Department of Industrial and Commercial Bank of China Limited since April 2010. He
joined ICBC in 1985 and has served as the General Manager of the Human Resource Department of
Industrial and Commercial Bank of China Limited since February 2009. He has previously served in
several positions at ICBC, including President of Yangquan Branch in Shanxi Province, Vice President
of Hebei Branch, General Manager of the Asset Risk Management Department and Director General
of the Internal Audit Department. He graduated from Nanjing University, and received a Doctorate
degree in Management.

Wei Guoxiong, Chief Risk Officer

Mr. Wei has served as Chief Risk Officer of Industrial and Commercial Bank of China Limited since
August 2006. He joined ICBC in 1987, and was appointed as General Manager of the Credit
Management Department in 2001. He previously served in several positions at ICBC including Acting
President of Wenzhou Branch, Vice President of Zhejiang Branch and General Manager of the
Industrial and Commercial Credit Department of the Head Office. He graduated from Tianjin
University of Finance and Economics, and received a Master’s degree in Economics.

Hu Hao, Board Secretary and Company Secretary

Mr. Hu has been the Board Secretary of the Bank since December 2010. Mr. Hu joined Industrial and
Commercial Bank of China in 1984, serving successively as the Deputy General Manager of the
Corporate and Commercial Loan Department, the Deputy General Manager of the Credit Management
Department and the General Manager of the Institution Operations Department. He previously served
as the President of Chinese Mercantile Bank, the Chairman of Industrial and Commercial Bank of
China Luxembourg S.A. and Deputy Director General of Construction and Administration Bureau of
South-to-North Water Diversion Middle Route Project. Currently, Mr. Hu is the General Manager of
the Strategic Management and Investor Relationship department of Industrial and Commercial Bank
of China Limited and is also a Director of Industrial and Commercial Bank of China (Asia) Limited,


                                                146
Xiamen International Bank, Taiping General Insurance Company Limited, Taiping Life Insurance
Company Limited. Mr. Hu Hao graduated from Hunan University with a Bachelor’s degree in
Economics and received a Doctorate degree in Economics from the Graduate School of the Chinese
Academy of Social Sciences. He holds a qualification certificate of senior economist.


Lin Xiaoxuan, Chief Information Officer

Mr. Lin has been the Chief Information Officer of the Bank since November 2010. He has served as
General Manager of Information and Technology Department of Industrial and Commercial Bank of
China Limited from July 2001 and until July 2009, since when he has served as Chief Officer of
Information and Technology, and concurrently General Manager of Information and Technology
Department, of Industrial and Commercial Bank of China Limited. Mr. Lin joined ICBC in 1989 and
served as Chief of Technology Protection Section and Head of Software Development and Operation
Centre of ICBC Fujian Branch, Deputy General Manager of Technology Protection Department of
ICBC Head Office and later General Manager of Information and Technology Department of ICBC,
and for a certain period of time concurrently served as General Manager of Data Centre of ICBC.
Currently, Mr. Lin is also the President of Financial Computer of China Magazine. He graduated from
East China Normal University and acquired a Master’s degree in Engineering. He has obtained the
professional and technological qualification of a Research Fellow.




                                               147
                                       THE PRC BANKING INDUSTRY

 This section contains information pertaining to the industry in which the Bank operates. The Bank
 has extracted and derived such information, in part, from various official or publicly available
 sources. The Bank believes that the sources of this information are appropriate for such
 information and have taken reasonable care in compiling and reproducing such information. While
 the Bank has no reason to believe that such information is false or misleading or that any fact has
 been omitted that would render such information false or misleading, the information has not been
 independently verified by the Bank or any of its affiliates or advisors, nor by any of the
 underwriters or any of their affiliates or advisors, and no representation, express or implied, is
 given as to its accuracy or completeness. In addition, certain financial data contained in this
 section, including data relating to the Bank, has been compiled in accordance with PRC GAAP, and
 differs from IFRS financial data presented elsewhere in this Offering Circular.

OVERVIEW

The PRC’s economy has grown significantly over the past three decades as a result of the PRC
government’s extensive economic reforms. According to the National Bank of South Carolina (the
NBSC), the PRC’s nominal GDP grew at a CAGR of 16.0 per cent. from RMB18.5 trillion to RMB33.5
trillion (US$2.8 trillion to US$5.1 trillion) between 2005 and 2009. According to the World Bank, the
PRC was the third largest economy in the world in terms of GDP in 2009. The following table sets
forth the PRC’s GDP and GDP per capita from 2005 to 2009.

                                                                     For the year ended 31 December
                                                      2005       2006       2007       2008      2009       CAGR
Nominal GDP (in billions of RMB) .                    18,494     21,631     26,581     31,405    33,535     16.0%
GDP per capita (in RMB) . . . . . . . .               14,144     16,456     20,117     23,648    25,125     15.4%

Source: NBSC


The rapid growth of the PRC’s economy has driven the expansion of the banking industry. From 2005
to 2009, total RMB-denominated loans and RMB-denominated deposits of the PRC’s banking
institutions increased at CAGRs of 19.7 per cent. and 20.1 per cent., respectively. The following table
sets forth the total loans and total deposits denominated in RMB and in foreign currencies, for the
periods indicated, for banking institutions in the PRC.

                                                                            At 31 December

                                                      2005       2006       2007       2008      2009       CAGR
Total loans denominated in RMB
  (in billions of RMB) . . . . . . . . . . .          19,469     22,529     26,169     30,340    39,969     19.7%
Total deposits denominated in RMB
  (in billions of RMB) . . . . . . . . . . .          28,717     33,543     38,937     46,620    59,774       20.1
Total loans denominated in foreign
  currencies (in billions of US$) . . .                 151          166       220        244         380     26.0
Total deposits denominated in
  foreign currencies (in billions of
  US$). . . . . . . . . . . . . . . . . . . . . . .     162          161       160        179         209    6.6%

Source: PBOC




                                                               148
In line with rising national income levels, retail customer deposits from both Urban Areas and County
Areas have been growing rapidly and have become an important source of funding for the PRC’s
banking industry. From 2005 to 2009, the CAGRs of domestic retail RMB-denominated time deposits
and demand deposits were 15.6 per cent. and 19.6 per cent., respectively. The following table sets
forth the amounts of domestic retail RMB-denominated time deposits and demand deposits from 2005
to 2009.

                                                                            At 31 December

                                                     2005       2006        2007     2008       2009     CAGR
                                                               (in billions of RMB except percentages)
Retail RMB-denominated time
  deposits . . . . . . . . . . . . . . . . . . . .    9,226     10,301      10,829   14,367     16,473   15.6%
Retail RMB-denominated demand
  deposits . . . . . . . . . . . . . . . . . . . .    4,879         5,858    6,746     7,834     9,992   19.6%

Source: PBOC


HISTORY AND DEVELOPMENT

From 1949 through the 1970s, the PRC’s banking industry functioned as part of a centrally planned
economy. The PBOC served as the PRC’s central bank as well as the primary commercial bank for
deposit-taking, lending and settlement activities. Since the late 1970s, as part of the PRC’s national
economic reforms, the banking industry has undergone significant changes. Several of the PBOC’s
commercial banking functions were separated from the PBOC’s central bank functions. The Big Four
assumed the role of state-owned specialised banks, while the State Council officially designated the
PBOC as the PRC’s central bank and as the principal regulator of the PRC’s banking system. The Big
Four were designated to specialise in agrarian financing, foreign exchange and trade finance,
construction and infrastructure financing and urban commercial financing, respectively. The State
Council granted the Big Four limited autonomy with respect to their commercial operations and as the
PRC’s economic reforms progressed, permitted them to expand into other commercial banking
businesses beyond their specialised functions.

In the mid-1980s, a number of new commercial banks and non-bank financial institutions were
established. Some of these new commercial banks, known as the Other National Commercial Banks,
were permitted to offer nationwide commercial banking services, while others were permitted to
operate only in local markets. However, during this period, the PRC’s banking system continued to
be tightly restricted by government plans and policies, and the PRC’s banks did not operate on an
independent or commercial basis.

In the mid-1990s, the PRC government accelerated its financial reforms and began to encourage the
Big Four to operate on a more commercial basis. In 1994, the PRC government established three
policy banks—China Development Bank, The Export-Import Bank of China and Agricultural
Development Bank of China—to assume most of the policy lending functions of the Big Four.
Accordingly, the Big Four started to be transformed into state-owned commercial banks. In 1995, the
PRC Commercial Banking Law and the PRC People’s Bank of China Law were enacted, which further
defined the business scope for commercial banks and the functions and powers of the PBOC as the
central bank and the banking industry regulator. In 2003, the CBRC was established as the primary
banking industry regulator and assumed most of the regulatory functions of the PBOC.




                                                              149
The PRC’s banking industry historically was characterised by substantial NPLs. Since the late 1990s,
the PRC government has taken numerous initiatives to improve the asset quality and strengthen the
capital base of PRC commercial banks, including the following:

•    In 1998, the MOF issued special government bonds and used the proceeds of RMB270 billion to
     make capital contributions to the Big Four to improve their capital adequacy.

•    In 1999, in order to further the reform of the PRC financial system, the PRC government
     established four wholly state-owned financial asset management companies—China Huarong
     Asset Management Corporation, China Great Wall Asset Management Corporation, China Cinda
     Asset Management Corporation and China Orient Asset Management Corporation—as vehicles
     to acquire, manage and dispose of non-performing assets of the Big Four. In 1999, the Big Four
     and China Development Bank transferred a total of RMB1,393.9 billion of their NPLs and other
     impaired assets to these asset management companies.

•    In 2001, the PRC joined the WTO and started to gradually open its banking sector to foreign
     financial institutions.

•    In 2003, Huijin made a capital contribution of US$22.5 billion to each of Bank of China and
     China Construction Bank.


•    In 2004, the MOF and Huijin made a total capital contribution of RMB8 billion to Bank of
     Communications.

•    In 2005, Huijin made a capital contribution of US$15 billion to the Bank. For a description of
     the Bank’s restructuring, see “Description of the Bank — Introduction — History”.

•    In 2008, Huijin made a capital contribution of approximately US$19 billion (equivalent to
     RMB130 billion) to Agricultural Bank of China prior to its transformation into a joint stock
     limited liability company.

As a result of the aforementioned efforts coupled with the rapid growth of the Chinese economy, the
asset quality of the PRC’s Large Commercial Banks has improved significantly, which lays a
foundation for future growth in the PRC banking sector. Furthermore, subsequent to the disposal of
NPLs and equity contributions from Huijin, the Bank, along with Bank of Communications, China
Construction Bank and Bank of China, introduced domestic and foreign strategic investors and listed
its shares on both the Shanghai Stock Exchange and Hong Kong Stock Exchange.

Meanwhile, many Other National Commercial Banks and a number of city commercial banks have also
introduced strategic investors, raised capital from shareholders to strengthen their capital bases, and
successfully listed their shares on domestic or overseas stock exchanges. Similar to some of the Large
Commercial Banks, they have also adopted international management practices and improved their
asset quality and profitability.




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CURRENT COMPETITIVE LANDSCAPE

The PRC’s banking institutions are generally categorised into Large Commercial Banks, Other
National Commercial Banks, city commercial banks, urban credit cooperatives, rural financial
institutions, foreign financial institutions and other banking institutions. The following table sets forth
the total amount of and market share by total assets, shareholders’ equity and net profit of different
categories of financial institutions in the PRC as of or for the year ended 31 December 2009.

                                                           At and for the year ended 31 December 2009
                                                                                   Shareholders’
                                                             Total assets             equity                   Net profit

                                            Number of                Market                  Market                    Market
                                            legal entity    Total    share       Total       share         Total       share
                                            institutions   amount     (%)       amount        (%)         amount        (%)

                                              (in billions of RMB, except numbers of institutions and percentages)
Large Commercial Banks . . .                          5    40,089       50.9       2,186          49.3         400          59.9
Other National Commercial
  Banks . . . . . . . . . . . . . . . .             12     11,785       15.0          563         12.7           93         13.8
City commercial banks . . . . .                    143      5,680        7.2          359          8.1           50          7.4
Urban credit cooperatives. . .                      11         27        0.0            2          0.0            0          0.0
Rural financial institutions (1)                  3467      8,638       11.0          431          9.7           51          7.7
Foreign financial
  institutions (2) . . . . . . . . . .              37      1,349        1.7          167          3.8            6          1.0
Other banking institutions (3)                     182     11,201       14.2          725         16.4           68         10.2
Total . . . . . . . . . . . . . . . . . .        3,857     78,769    100.0%        4,434      100.0%           668     100.0%


Sources: CBRC 2009 annual report


(1)    Rural financial institutions refer to rural credit cooperatives, rural commercial banks, rural cooperative banks, township
       banks, loan companies and rural mutual cooperatives. The data of total assets, shareholders’ equity and net profit, along
       with the respective market shares of rural financial institutions in this table only include those of rural credit
       cooperatives, rural commercial banks and rural cooperative banks.


(2)    Foreign financial institutions refer to branches and locally incorporated subsidiaries and joint-venture banks of foreign
       banks.


(3)    Other banking institutions refer to policy banks, financial asset management companies, trust companies, finance
       companies, financial leasing companies, automobile finance companies, money brokerage firms and Postal Savings Bank
       of China. The data of total assets, shareholders’ equity and net profit, along with the respective market shares of other
       banking institutions in this table, only include those of policy banks, trust companies, finance companies, financial
       leasing companies, automobile finance companies, money brokerage firms and Postal Savings Bank of China.


Large Commercial Banks

The Bank, together with Bank of China, Bank of Communications, China Construction Bank and
Agricultural Bank of China, are the major source of financing for the PRC’s corporations, institutions
and individuals. According to the 2009 annual report of the CBRC, the Large Commercial Banks
together accounted for 50.9 per cent. of the total assets of all banking institutions in the PRC at 31
December 2009. According to the 2009 annual reports of the CBRC and the Large Commercial Banks,
the Large Commercial Banks together accounted for 50.4 per cent. of the total loans and 56.1 per cent.
of the total deposits of all banking institutions in the PRC at 31 December 2009.


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The following table sets forth the total number of domestic branch outlets, total assets, total loans and
total deposits of the Large Commercial Banks.

                                                                    At 31 December 2009

                                               Total
                                                                                                 Total deposits from
                                            number of
                                                          Total assets         Total loans            customers
                                             domestic
                                              branch               %of                  %of                  %of
                                              outlets   Amount     total    Amount      total    Amount      total
                                             (in billions of RMB, except numbers of institutions and percentages)
Agricultural Bank of China              .      23,624     8,883      21.0     4,138       19.3      7,498      21.8
Industrial and Commercial
  Bank of China . . . . . . . .         .      16,232    11,785      27.8     5,729       26.7      9,771      28.5
China Construction Bank . .             .      13,384     9,623      22.7     4,820       22.5      8,001      23.3
Bank of China . . . . . . . . . .       .       9,988     8,752      20.7     4,910       22.9      6,685      19.5
Bank of Communications . .              .       2,761     3,309       7.8     1,839        8.6      2,372       6.9
Total . . . . . . . . . . . . . . . . . .      65,989    42,352    100.0%    21,436    100.0%     34,327    100.0%


Source: 2009 annual reports of the banks.


Other National Commercial Banks


As of 31 December 2009, 12 Other National Commercial Banks had been granted licences to engage
in nationwide commercial banking activities in the PRC and together accounted for 15.0 per cent. of
the total assets, 12.7 per cent. of the total shareholders’ equity and 13.8 per cent. of the total net profit
of all banking institutions in the PRC.


City Commercial Banks and Urban Credit Cooperatives


City commercial banks and urban credit cooperatives are in general permitted to engage in commercial
banking activities within their respective designated geographic areas. Some of the city commercial
banks have established cross-region branches operating in other cities. As of 31 December 2009, there
were 143 city commercial banks and 11 urban credit cooperatives in the PRC. These two categories
of financial institutions together accounted for 7.2 per cent. of the total assets, 8.1 per cent. of the total
shareholders’ equity and 7.4 per cent. of the total net profit of all banking institutions in the PRC.

Rural Financial Institutions


Rural financial institutions consist mainly of rural credit cooperatives, rural commercial banks, rural
cooperative banks, township banks, loan companies and rural mutual cooperatives. Compared with
Large Commercial Banks and Other National Commercial Banks, they provide a limited range of
banking products and services to enterprises and residents in the County Areas, including retail
deposits and loans and settlement services. Since the end of 2006, the CBRC has introduced a series
of policies and measures to encourage the establishment of non-traditional rural financial institutions
such as township banks, loan companies and rural mutual cooperatives in the County Areas. As of 31
December 2009, there were 3,056 rural credit cooperatives, 43 rural commercial banks, 196 rural
cooperative banks, 148 township banks, eight loan companies and 16 rural mutual cooperatives,
accounting for together 11.0 per cent. of the total assets, 9.7 per cent. of the total shareholders’ equity
and 7.7 per cent. of the total net profit of all banking institutions in the PRC.



                                                             152
Foreign Financial Institutions

Foreign financial institutions include representative offices of foreign-owned and joint-venture banks
and branches and locally incorporated subsidiaries of foreign banks. Foreign banks in the PRC were
initially subject to certain restrictions on RMB-denominated businesses in terms of geographic
presence and customer segment, which were lifted at the end of 2006. As of 31 December 2009, 194
banks from 46 foreign jurisdictions had opened representative offices in the PRC while 33
foreign-owned banks had incorporated in the PRC. At and for the year ended 31 December 2009,
foreign financial institutions together accounted for 1.7 per cent. of the total assets, 3.8 per cent. of
the total shareholders’ equity and 1.0 per cent. of the total net profit of all banking institutions in the
PRC.

Other Banking Institutions

Other banking institutions include policy banks, financial asset management companies, trust
companies, finance companies, financial leasing companies, automobile finance companies, money
brokerage firms and Postal Savings Bank of China. At and for the year ended 31 December 2009, these
banking institutions together accounted for 14.2 per cent. of the total assets, 16.4 per cent. of the total
shareholders’ equity and 10.2 per cent. of the total net profit of all banking institutions in the PRC.

INDUSTRY TRENDS

Enhanced Industry Fundamentals

Since 2003, the transformation of state-owned commercial banks into joint stock commercial banks
has had a profound effect on the reform and development of the banking industry in the PRC. Since
then, the PRC banking sector has witnessed significant improvement in corporate governance, risk
management, capital strength, profitability, branding and market recognition. From 2005 to 2009,
according to the 2009 annual report of the CBRC, the total assets of the banking institutions in the
PRC increased by RMB41.3 trillion, representing a CAGR of 20.4 per cent., while shareholders’
equity increased by RMB2.8 trillion, representing a CAGR of 27.8 per cent.. The asset quality of the
banking institutions in the PRC also improved significantly. During the same period, NPLs of
commercial banks in the PRC decreased from RMB1,313 billion to RMB497 billion and their NPL
ratio decreased from 8.61 per cent. to 1.58 per cent.. In the recent global financial crisis, the PRC’s
banking sector was in general not materially affected, and, as of the end of 2009, Industrial and
Commercial Bank of China, Bank of China and China Construction Bank were ranked among the top
global banks in terms of market capitalisation.

The following table sets forth the NPL ratios and allowance to NPLs of the Large Commercial Banks
and Other National Commercial Banks from 2005 to 2009.

                                                                                  At 31 December

                                                              2005         2006        2007          2008        2009
                                                                                  (in percentages)
Non-performing loan ratio (1) . . . . . . . . . . . . . .      8.9%         7.5%         6.7%          2.4%       1.6%
Allowance to non-performing loans (2) . . . . . . .           24.8%        34.3%        39.2%        117.9%     155.4%

Source: CBRC


(1)   Calculated by dividing non-performing loans and advances to customers by total loans and advances to customers


(2)   Calculated by dividing the allowance for impairment losses on total loans and advances by total non-performing loans
      and advances to customers.



                                                            153
Enhanced Regulation and Supervision

The PRC’s banking regulators have established and continue to improve a prudent regulatory
framework, and at the same time, continue to push forward the PRC’s financial reforms in numerous
areas such as corporate governance, internal control, compliance and risk management. In particular,
regulations have strengthened information disclosure requirements and coordination and cooperation
with domestic and foreign regulators.

Following the global financial crisis in 2008, the CBRC has reinforced its policy objectives towards
(i) prudential supervision and (ii) counter-cyclical regulation.

•    Prudential supervision: the CBRC promulgated rules and regulations to guide commercial banks
     to further improve their risk management systems and establish effective protocols to prevent
     excessive exposure to high-risk markets and industries. The regulatory measures covered a full
     range of potential risks including credit, market, operational and liquidity risks.

•    Counter-cyclical regulation: the CBRC also promulgated guidelines aimed at encouraging
     commercial banks to better address the lending needs generated by the growing economy while
     effectively managing potential risks. Specific measures include encouraging the extension of
     acquisition loans and specialised management of lending to small businesses, broadening
     industry scope for project financing and promoting innovative credit guarantee and consumer
     loan insurance arrangements.

As part of its prudential supervision, the CBRC has promulgated a series of regulations and guidelines
in accordance with Basel II to strengthen commercial banks’ capital management capabilities. These
regulations and guidelines relate to, among others, capital adequacy ratio disclosure, capital
measurement and risk exposure calculations.

Substantial and Rapid Growth of Banking Business in the County Areas


Driven by the PRC’s fast-paced urbanisation and industry migration to the County Areas, the County
Area economy has grown rapidly and become increasingly important to the PRC’s overall economy
over the past decade. The County Areas accounted for 95.2 per cent. of the PRC’s total landmass and
69.8 per cent. of the PRC’s total population as of 31 December 2008 and 49.6 per cent. of the PRC’s
total GDP in 2008.


The rapid growth of the County Area economy and the favourable policies implemented by the PRC
government have in recent years spurred a fast-growing County Area banking market. However, the
penetration rate in the County Area banking market remains relatively low, which represents
significant growth potential. In this context, certain Large Commercial Banks and foreign banks have
intensified their market expansion efforts in the County Areas. In the meantime, non-traditional rural
financial institutions have grown rapidly. As of 31 December 2009, 172 non-traditional rural financial
institutions had been established in the PRC. According to the CBRC, as of 31 December 2008, the
total outstanding loans of all County Area financial institutions amounted to RMB5,996.6 billion,
representing 18.7 per cent. of the total loans of all banking institutions in the PRC. The CAGR of the
County Area loans reached 16.0 per cent. between 2005 and 2008, exceeding the national rate of 15.7
per cent. during the same period.




                                                 154
Increasing Demand for Retail Banking Products and Services

Due to rising household income and the resulting life-style change and consumption upgrade,
residential mortgage loans, bank cards and other consumer finance products as well as wealth
management services have become major growth drivers for Chinese commercial banks. Retail
banking is presented with significant growth opportunities associated with increasing consumer
demand for more diversified banking products and services. The following table sets forth the PRC’s
GDP per capita, selected household income and the Large Commercial Banks’ retail loan data for the
periods indicated.

                                                                  At and for the year ended 31 December

                                                        2005       2006        2007     2008     2009      CAGR
GDP per capita (in RMB) . . . . . . .               .   14,144     16,456      20,117   23,648   25,125    15.4%
Per capita disposable income of
  urban households (in RMB) . . . .                 .   10,493     11,759      13,786   15,781   17,175      13.1
Per capita net income of County
  Area households (in RMB) . . . . .                .    3,255         3,587    4,140    4,761     5,153     12.2
Large Commercial Banks’ retail
  loan balance (in billions of
  RMB) . . . . . . . . . . . . . . . . . . . . .    .    1,944         2,229    2,872    3,124     4,543   23.6%
Large Commercial Banks’ retail
  loans as percentage of their total
  loans . . . . . . . . . . . . . . . . . . . . .   .   16.8%      17.1%       19.4%    19.4%     21.2%       —

Sources: NBSC, annual reports of the Large Commercial Banks


In addition to traditional retail banking, a new market for wealth management services has emerged
as a result of the rapid increase in household wealth and an expanding class of wealthy individuals.
Commercial banks have started to offer customised and professional wealth management services to
mid- to high-end customers, such as asset allocation, dynamic wealth management and corporate
finance advisory services. Following the establishment of private banking business by several foreign
banks, domestic commercial banks have also set up their own private banking departments and started
to increase their market penetration in private banking services to high net worth individuals.

Expanding Beyond Traditional Commercial Banking Business

In addition to growing traditional banking products and services, the PRC financial services industry
has in recent years expanded financial product and service offerings in areas such as financial leasing,
fund management and insurance. As of 31 December 2008, seven Chinese commercial banks had
jointly invested in or established financial leasing subsidiaries and eight Chinese commercial banks,
including the Bank, had established fund management subsidiaries. As of 31 December 2008,
bank-owned fund management companies commanded a market share of 12.4 per cent. in terms of the
total net assets under management in the PRC.

Historically, banks in the PRC were prohibited from underwriting insurance products and services. In
November 2009, the CBRC promulgated the Pilot Administrative Measures for Commercial Banks to
Make Equity Investments in Insurance Companies, permitting commercial banks to invest in the
insurance industry. Currently, the PRC government is seeking to establish a mechanism for
coordinating regulatory supervision in this regard among the PBOC, MOF, CBRC, CSRC, CIRC and
other financial regulators.


                                                                 155
As banks continue to expand their financial product and service offerings in non-traditional areas,
cross-selling financial products across a bank’s integrated branch network and electronic banking has
become an important way for banks to increase their fee and commission income. In 2009, according
to the information made publicly available by the PRC’s 14 listed banks, total fee and commission
income of these banks accounted for 16.3 per cent. of their total income, compared to 6.4 per cent.
in 2005. However, this is still substantially lower than more mature overseas banking markets and is
expected to increase as domestic banks continue to expand their fee- and commission-based product
and service offerings to meet the demand of increasingly sophisticated corporate and retail customers.
Accordingly, it is expected that the fee- and commission-based businesses of the PRC’s banks will
have significant growth potential.

Achieving Competitive Differentiation through Customer Segmentation and Process
Reengineering

As the PRC’s banks continue to expand the scope and scale of their business, their ability to offer
differentiated services to meet customers’ diversified banking needs has become an increasingly
important part of their core competitiveness.

To promote their competitive differentiation, the PRC’s banks have taken various measures including:
(i) engaging in market segmentation, defining target customer groups and customising service
offerings; (ii) revamping business models to gain competitive advantages in terms of cost control,
quality and customer satisfaction; and (iii) promoting brand awareness.

In addition, the PRC’s banks have initiated the reengineering of their management and business
processes. Some banks have also: (i) established dedicated business units and intensified their
marketing efforts to provide customers with one-stop tailored products and services; (ii) further
streamlined their credit approval processes and implemented vertical risk management; and (iii)
centralised back office management to improve efficiency and reduce operating costs. For example,
all Large Commercial Banks have established independent operational management departments and
data centres as well as processing and settlement centres.




                                                 156
                           SUPERVISION AND REGULATION

The following information has been derived from various PRC laws and regulations, government and
other public sources of information, and has not been independently verified by the Bank.

Overview

The banking industry in the PRC is highly regulated. The principal regulatory authorities in the PRC
banking industry include the CBRC and the PBOC. The CBRC was established in April 2003 and took
over from the PBOC its role as the primary regulator of the PRC banking industry. The CBRC is
responsible for supervising and regulating banking institutions, and the PBOC, as the central bank of
the PRC, is responsible for formulating and implementing monetary policies. The Bank is also subject
to regulation by the MOF. The principal laws and regulations relating to the PRC banking industry are
the PRC Commercial Banking Law, the PRC PBOC Law and the PRC Banking Supervision and
Regulatory Law, and the rules and regulations promulgated thereunder.

Principal Regulators

CBRC

Functions and Powers

The PRC Banking Supervision and Regulatory Law sets out the regulatory functions and
responsibilities of the CBRC. The CBRC is the principal regulatory authority responsible for the
supervision and regulation of banking institutions operating in the PRC, including commercial banks,
urban credit cooperatives, rural credit cooperatives, other deposit-taking financial institutions and
policy banks, as well as certain non-banking financial institutions, such as financial asset management
companies, trust and investment companies, financial companies, financial leasing companies and
other financial institutions the establishment of which is subject to the CBRC’s approval. The CBRC
is also responsible for the supervision and regulation of the entities established by domestic financial
institutions outside the PRC and the overseas operations of the above-mentioned banking and
non-banking financial institutions. According to the PRC Banking Supervision and Regulatory Law
and relevant regulations, the CBRC’s primary regulatory responsibilities include:

•    formulating and promulgating rules and regulations governing banking institutions and their
     activities;

•    examining and approving the establishment, change and termination of banking institutions and
     their scope of business, as well as granting banking licences to commercial banks and their
     branches;

•    regulating the business activities of banking institutions, including their products and services
     offered;

•    approving or overseeing qualification requirements for directors and senior management
     personnel of banking institutions;

•    setting prudential guidelines and standards for risk management, internal control, capital
     adequacy, asset quality, allowance for impairment losses, risk concentration, related party
     transactions and liquidity requirements for banking institutions;

•    conducting on-site inspection and off-site surveillance of the business activities and risk levels
     of banking institutions;


                                                  157
•    imposing corrective and punitive measures for violations of applicable banking regulations; and

•    drafting and publishing statistics and financial reports of national banking institutions.

Examination and Supervision

The CBRC, through its head office in Beijing and its branches throughout the PRC, monitors the
operations of banks and their branches through on-site examinations and off-site surveillance. On-site
examinations generally include inspecting a bank’s business premises, interviewing its employees,
and asking its senior management and directors to explain significant issues relating to its operations
and risk management, as well as reviewing relevant documents and materials kept by the bank.
Off-site surveillance generally includes reviewing various business reports, financial statements and
other reports regularly submitted by banks to the CBRC.

If a banking institution is not in compliance with an applicable banking regulation, the CBRC is
authorised to impose corrective and punitive measures, including imposing fines, ordering the
suspension of certain business activities, imposing restrictions on dividends and other forms of
distributions and asset transfers, and suspending the opening of new branches. In extreme cases or
when a commercial bank fails to take corrective action within the time period specified by the CBRC,
the CBRC may order a banking institution to suspend operations and revoke its financial operating
licence. In the event of crisis or failure within a banking institution, the CBRC may assume
management control over, or arrange for the restructuring of, such banking institution.

PBOC

As the central bank of the PRC, the PBOC is responsible for formulating and implementing monetary
policies and maintaining the stability of the PRC financial markets. According to the PRC PBOC Law
and relevant regulations, the PBOC is empowered to:

•    promulgate and implement orders and regulations in relation to its duties;

•    formulate and implement monetary policy in accordance with laws;

•    issue Renminbi and administer its circulation;

•    regulate the inter-bank money market and the inter-bank bond market;

•    implement foreign exchange controls and regulate the inter-bank foreign exchange market;

•    regulate the gold market;

•    hold, administer and manage state reserves of foreign exchange and gold;

•    manage the national treasury;

•    safeguard the normal operation of payment and clearing systems;

•    guide and orchestrate the financial industry in its anti-money laundering activities and take
     responsibility for monitoring capital in respect of anti-money laundering; and

•    take responsibility for financial industry statistics, surveys, analyses and forecasts.


                                                 158
MOF

As a ministry under the State Council, the MOF is empowered to perform its duties in respect of state
finance, tax and state-owned assets management. The MOF mainly regulates the performance review
and compensation systems for senior management of state-controlled banks as well as state-owned
assets appraisal. Since the PRC Accounting Standards and Accounting Regulations for Business
Enterprises issued by the MOF came into effect on 1 January 2007, the MOF is also responsible for
monitoring their implementation in the banking industry. The MOF’s primary responsibilities include:

•     drafting laws and regulations in respect of fiscal, finance and accounting management, enacting
      rules, organizing international negotiation regarding foreign-related finance and debt and
      agreeing the form of relevant agreements and accords;

•     managing financial state-owned assets, participating in drafting rules in relation to state-owned
      assets management and administering assets appraisal; and

•     monitoring and inspecting the implementation of financial and tax rules and policies, reporting
      critical issues in fiscal income and expenses management and managing supervision
      commissioners’ offices.

Other Regulatory Authorities

In addition to the above regulators, commercial banks in the PRC are also subject to supervision and
regulation by other regulatory authorities, including the SAFE, the CSRC, the CIRC and the State
Administration of Taxation (the SAT).

Licensing Requirements

Basic Requirements

The PRC Commercial Banking Law and the Measures for Implementation of Administrative Licensing
Matters Concerning Chinese-funded Commercial Banks, effective from 1 February 2006, set out the
permitted scope of business, licensing standards and other requirements in respect of commercial
banks. The establishment of a commercial bank requires the CBRC’s approval and issuance of an
operating licence. The conditions include:

•     the articles of association of the proposed commercial bank complying with relevant
      requirements of the PRC Commercial Banking Law and the PRC Company Law;

•     the registered capital of the proposed commercial bank meeting the minimum requirement under
      the PRC Commercial Banking Law, which is RMB1 billion, RMB100 million and RMB50 million
      for a national commercial bank, a city commercial bank and a rural commercial bank,
      respectively;

•     the directors and the senior management of the proposed commercial bank possessing the
      requisite qualifications;

•     the organisational structure and management system of the proposed commercial bank being
      properly established; and

•     the safety and security of the business premises and other facilities of the proposed commercial
      bank, as well as their security measures complying with relevant requirements.


                                                  159
Significant Changes

Banks are required to obtain the CBRC’s approval to undertake significant changes, including:

•    change of name;

•    change of registered capital;

•    change of location of head office and branches;

•    change of business scope;

•    purchase of an equity interest in the bank that results in the purchaser becoming a holder of 5
     per cent. or more of the bank’s shares, and any change of shareholders holding 5 per cent. or
     more of the bank’s total capital or shares;

•    amendment to the articles of association;

•    merger or division; and

•    dissolution and liquidation.

Establishment of Branches

Domestic Branches

A commercial bank must apply to the CBRC or its local offices for approval and issuance of a business
license and banking licence to establish a branch. To obtain such business licence and banking licence,
the branch must have sufficient operating funds commensurate with its scale and must meet other
operating requirements. A commercial bank is required to allocate a minimum amount of operating
funds for each branch, and the total of the operating funds provided to all branches of a commercial
bank may not exceed 60 per cent. of its total capital.

Overseas Branches

The establishment of overseas branches by a PRC commercial bank is subject to the CBRC’s approval
in addition to compliance with all applicable regulations in the relevant foreign jurisdictions. The bank
making such application must comply with the following conditions:

•    its capital adequacy ratio should not be lower than 8 per cent.;

•    in principle, the balance of equity investment should not exceed 50 per cent. of its net assets;

•    it was profitable for the past three consecutive fiscal years;

•    the balance of its assets was no less than RMB100 billion at the end of the year immediately prior
     to the application;

•    it has legal and sufficient foreign exchange sources;

•    it has a good corporate governance system as well as sound and efficient internal control
     measures in place;


                                                  160
•    the major indicators for prudential controls and management fulfil regulatory requirements; and

•    other prudential conditions required by the CBRC are satisfied.

Scope of Business

Under the PRC Commercial Banking Law, commercial banks in the PRC are permitted to engage in
any or all of the following activities:

•    taking deposits from the public;

•    making short-term, medium-term and long-term loans;

•    effecting domestic and overseas payment settlements;

•    accepting and discounting instruments;

•    issuing bonds;

•    acting as agents to issue, honour and underwrite government bonds;

•    trading government bonds and financial institution bonds;

•    engaging in inter-bank lending;

•    engaging in foreign exchange trading as principal or as agent;

•    engaging in bank card business;

•    providing letters of credit and guarantee services;

•    collecting and making payment as agents and acting as insurance agents;

•    providing safe deposit box services; and

•    other businesses approved by the CBRC.

Commercial banks in the PRC are required to stipulate their scope of business in their articles of
association and submit their articles of association to the CBRC for approval. Subject to approval by
the SAFE, commercial banks can engage in settlement and sales of foreign exchange.

Regulation of Principal Commercial Banking Activities

Set out below are some of the key regulatory provisions that apply to the Bank’s core business
activities.

Lending

To control risks relating to credit extension, PRC banking regulations require that commercial banks
should, among other things: (i) establish a strict and unified credit risk management system; (ii)
establish standard operation procedures for each step in the extension of credit, including conducting
due diligence investigations before granting credit facilities, monitoring borrowers’ repayment ability
and preparing credit assessment reports on a regular basis; and (iii) make arrangements to appoint
qualified risk control personnel.


                                                 161
The CBRC has also issued guidelines and measures to control risks in connection with related party
loans. See “— PRC Banking Supervision and Regulation — Corporate Governance and Internal
Control — Transactions with Related Parties”.

On 23 July 2009, the CBRC issued the Interim Measures for the Administration of Fixed Asset Loans
to ensure that loans flow to efficient real economy and critical projects, prevent credit risk, optimise
lending structure, improve lending management quality of banking institutions, avoid systematic risk
in the banking industry as well as promote risk management capabilities of banking institutions.

In addition, the CBRC has issued regulations concerning loans and credit granted to certain specific
industries and customers in an effort to control the credit risk of PRC commercial banks. These mainly
include:

•    the Guidelines on the Management of Risks of Credit Granted by Commercial Banks to Group
     Borrowers, which require commercial banks to establish a risk management system of credit
     granted to group borrowers and file with the CBRC. Under the circumstance that the credit
     exposure to a single group borrower of a commercial bank exceeds 15 per cent. of its regulatory
     capital, the commercial bank shall adopt measures, including syndicated loans, joint loans and
     transfer of loans, to disperse risks. In line with prudential supervision requirement, the CBRC
     may lower the ratio for credit exposure to a single group borrower;

•    the Guidelines on the Management of Risks of Real Estate Credit Granted by Commercial Banks,
     which require commercial banks to establish real estate credit review and approval standards as
     well as a risk management and internal control system in connection with market risk, legal risk
     and operational risk to real estate credit. Commercial banks are not allowed to issue real estate
     development loans to borrowers without land use right certificates and relevant permissions. The
     CBRC conducts a periodic inspection of the implementation of the guidelines;

•    the Automobile Loan Measures, which require commercial banks to establish a credit rating
     system and monitoring system in connection with automobile loans. The measures also set out
     certain conditions for automobile loans application. In addition, the amount of automobile loans
     shall not exceed 80 per cent. of the price of vehicles for self-use purpose, 70 per cent. of the price
     of vehicles for commercial purpose and 50 per cent. of the price of second-hand vehicles.
     Commercial banks shall also require borrowers to provide security over their vehicles or other
     types of security for automobile loans;

•    the Interim Measures for the Administration of Working Capital Loans, which require
     commercial banks to establish effective internal control and risk management systems to monitor
     the use of working capital loans and get full access to customer information. Commercial banks
     shall take reasonable and prudential measures to compute actual demand of clients and determine
     the amount of loans, which shall not exceed actual demand of clients. Commercial banks shall
     set out definitive and legitimate purpose for working capital loans. Such working capital loans
     shall not be used for fixed assets investment and equity investment or for fields or purposes
     prohibited by law;

•    the Guidelines on the Management of Risks of Merger and Acquisition Credit Granted by
     Commercial Banks, which require commercial banks to establish an operation flow and internal
     control system pursuant to the guidelines and launch their implementation following reporting to
     the CBRC. Commercial banks are allowed to operate merger and acquisition credit business if
     they meet the following requirements: (i) a sound risk management system and an effective
     internal control system are established; (ii) the allowance adequacy ratio for loan impairment is
     not less than 100 per cent.; (iii) the capital adequacy ratio is not less than 10 per cent.; (iv) the


                                                   162
     general reserve is not less than 1 per cent. of the balance of loans for the same period; and (v)
     a professional team for due diligence and risk evaluation is formed. The guidelines also set out
     certain requirements for risks evaluation and control in relation to merger and acquisition,
     including overall strategic risk, legal and compliance risk, consolidation risk, operational risk
     and financial risk;

•    the Interim Measures for the Administration of Personal Loans, which require commercial banks
     to establish an effective full process management mechanism and risk limit management system
     in connection with personal loans. The measures also set out certain conditions for personal loans
     application. The use of personal loans should comply with relevant laws and policies.
     Commercial banks must specify the purpose for personal loans; and

•    the Guidelines on Project Financing Business, which require banking institutions to establish a
     sound operation flow and risk management mechanism. Banking institutions shall fully identify
     and evaluate risks associated with the project construction period and operation period, including
     policy risk, financing risk, completion risk, product market risk, over-budget risk, raw material
     risk, operational risk, exchange rate risk, environmental risk and other related risks. Banking
     institutions shall also focus on borrowers’ repayment capability to evaluate risks on the aspects
     of technical and financial feasibility as well as repayment sources. In addition, banking
     institutions shall require borrowers to set up a designated account to receive all revenues from
     projects, monitor the account and take actions in case of unusual movements.

Foreign Exchange Business

Commercial banks are required to obtain approvals from the CBRC and the SAFE to conduct foreign
exchange businesses. Under the PRC’s anti-money laundering laws and regulations, PRC financial
institutions are required to report to the SAFE on a timely basis any large or suspicious foreign
exchange transactions which they encounter.

Securities Trading and Asset Management Business

Commercial banks in the PRC are generally prohibited from trading and underwriting equity
securities. Commercial banks in the PRC are permitted to:

•    underwrite and deal in PRC government bonds;

•    act as agents in transactions involving securities, including bonds issued by the PRC
     government;

•    provide institutional and individual investors with comprehensive asset management advisory
     services;

•    act as financial advisors in connection with large infrastructure projects, merger and acquisition
     transactions and bankruptcy reorganisations; and

•    act as custodians for funds, including securities investment funds and corporate annuity funds.

Under the Administrative Measures on Qualifications for Securities Investment Fund Custodianship
promulgated jointly by the CSRC and the CBRC on 29 November 2004 and effective on 1 January
2005, a commercial bank is permitted to apply for the qualification to engage in the securities
investment fund custodian business if, among other requirements, such commercial bank had net
assets at the year-end of not less than RMB2 billion for each of the latest three fiscal years and its
capital adequacy ratio fulfils the relevant regulatory requirements. The fund custodian must ensure the


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separation of its custodian business from its other businesses, as well as the independence of its fund
assets. The CSRC and the CBRC are jointly responsible for examining and approving the
qualifications and supervising the activities of fund custodians. In addition, senior managers of a
commercial bank’s fund custody department must have certain qualifications and their appointments
must obtain approval by the CSRC. According to the Interim Measures for the Administration of
Corporate Annuity Funds promulgated jointly by the Ministry of Labor and Social Security, the CBRC
and other authorities on 23 February 2004 and effective on 1 May 2004, commercial banks are
required to file with the CBRC to act as custodian for corporate annuity funds and establish a
specialised funds custodian department.

Insurance


Commercial banks in the PRC are not permitted to underwrite insurance policies, but are permitted to
act as agents to sell insurance products through their distribution networks. Commercial banks that
conduct agency sales of insurance products are required to comply with applicable rules issued by the
CIRC. Pursuant to the Interim Measures on the Administration of Ancillary Agency Insurance
Business promulgated by the CIRC on 4 August 2000, commercial banks are required to obtain
licences from the CIRC before conducting insurance agency business. Pursuant to the Notice
Regarding Standardization of Insurance Agency Business Conducted by Banks issued jointly by the
CIRC and the CBRC on 15 June 2006, such licences are required for all main branches of commercial
banks conducting such business.


On 13 January 2010, the CIRC and the CBRC jointly promulgated the Circular on Strengthening
Restructuring and Improving the Healthy Development of Banks’ Life Insurance Agency Services
which enhanced supervision over life insurance agency licences. The circular requires all commercial
banks to obtain a licence issued by the CIRC before engaging in life insurance agency business
through their outlets.

Personal Wealth Management Services


In September 2005, the CBRC issued the Provisional Administrative Measures on the Personal Wealth
Management Business of Commercial Banks. Under these measures, commercial banks are required
to obtain CBRC approval to provide certain wealth management services whereas in respect of certain
other wealth management services, they are only required to submit a report to the CBRC. Commercial
banks are also subject to certain restrictions on offering products under personal wealth management
plans. In addition, under the Guidelines on Risk Management Regarding Personal Wealth Management
Services of Commercial Banks issued by the CBRC in September 2005, commercial banks are required
to establish an auditing and reporting system in respect of their wealth management services and to
report to the relevant authorities any material risk management problems. Thereafter, the CBRC issued
a series of documents in an effort to further improve the reporting mechanism and risk control for
personal wealth management services provided by commercial banks.


In addition to domestic wealth management business, the PBOC, the CBRC, and the SAFE jointly
promulgated the Provisional Measures for Overseas Wealth Management by Commercial Banks which
came into effect on 17 April 2006 and permit duly licensed commercial banks to make overseas
investments in pre-approved financial products on behalf of domestic institutions and individuals.




                                                 164
Electronic Banking

In January 2006, the CBRC issued the Administrative Measures Regulating Electronic Banking
Business and Security Evaluation Guidelines on Electronic Banking in an effort to enhance risk
management and security standards in this sector. All banking institutions applying to establish an
e-banking business are required to have sound internal control and risk management systems and
should not have any major incidents relating to their primary information management and operations
processing systems in the year immediately prior to the application. In addition, all banking
institutions conducting e-banking business must adopt security measures to maintain information
confidentiality and prevent the unauthorised use of e-banking accounts.

Proprietary Investments


In general, commercial banks in the PRC are prohibited from making domestic investments other than
in debt instruments issued by the PRC government and financial institutions, short-term commercial
paper, medium-term notes and corporate bonds issued by qualified non-financial institutions, and
certain derivative products. Unless approved by the PRC government, commercial banks in the PRC
are prohibited from engaging in trust investment and securities businesses, investing in real property
(other than for their own use) or investing in non-banking financial institutions and enterprises.


Derivatives


On 4 February 2004, the CBRC issued the Provisional Administrative Measures on Derivative
Business of Financial Institutions, which set out, among other things, detailed regulations on market
access and risk management for the derivatives business conducted by financial institutions. In
accordance with the provisional measures, commercial banks in the PRC seeking to conduct
derivatives business must meet relevant qualification requirements and obtain prior approval from the
CBRC. The CBRC issued the Circular on Risk Alert Regarding Trading of Derivative Products by
Domestic Banks on 22 March 2005, amended the Tentative Administrative Measures on the
Management of Dealings in Derivative Products of Financial Institutions on 28 December 2006
(effective from 3 July 2007), and issued the Notice to Further Strengthen Risk Management of
Derivative Product Transaction between Banking Institutions and Institutional Customer on 31 July
2009 in an effort to further strengthen the risk management of derivatives business conducted by
commercial banks in the PRC.

Support for, and Encouragement of, Financial Innovation by PRC Commercial Banks

In December 2006, the CBRC promulgated the Guidelines on Financial Innovation of Commercial
Banks, the purpose of which is to encourage PRC commercial banks to engage prudently in financial
innovation-related activities, including developing new businesses and products and improving
existing businesses and products, expanding their scope of business, improving cost efficiency and
profitability, and reducing their reliance on lending business for profits. To facilitate financial
innovation by PRC commercial banks, the CBRC has indicated that it will streamline the examination
and approval procedures for new products and increase the efficiency of the examination and approval
process.




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Pricing of Products and Services

Interest Rates for Loans and Deposits

Interest rates for RMB-denominated loans and deposits were historically set by the PBOC. In
accordance with the PRC Commercial Banking Law, each commercial bank is required to determine
its loan rate in accordance with the minimum limit of loan rate and its deposit rate in accordance with
the maximum limit of deposit rate set by the PBOC, respectively. In recent years, the PBOC has
gradually liberalised its regulation of interest rates, allowing banks more discretion to determine the
interest rates for RMB-denominated loans and deposits. The following table sets forth, for the periods
indicated, the permitted range of interest rates for RMB-denominated loans and deposits.

                                            Loans Since 29/10/2004 (1)                   Deposits Since 29/10/2004 (2)
Maximum interest rates . . . . No cap (up to 230% of the PBOC PBOC benchmark rate, except for
                               benchmark rate for rural and   negotiated deposits
                               urban credit cooperatives)

Minimum interest rates . . . . Not lower than 90% of the PBOC No minimum
                               benchmark rate

(1)   From 17 March 2005 to 18 August 2006, interest rates for residential mortgage loans were regulated in the same way
      as most other types of loans. Since 19 August 2006, the minimum interest rates for personal commercial residential
      mortgage loans have been changed to 85% of the PBOC loan benchmark rate. Since 27 October 2008, the minimum
      interest rates for personal commercial residential mortgage loans have been changed to 70% of the PBOC loan benchmark
      rate.


(2)   Beginning on 29 October 2004, commercial banks in the PRC are permitted to set their own interest rates on RMB
      deposits so long as such interest rates are not higher than the relevant PBOC benchmark rates. However, these restrictions
      do not apply to interest rates on negotiated deposits, which are deposits by domestic insurance companies in amounts
      of RMB30 million or more or deposits by the provincial social security agencies in amounts of RMB500 million or more,
      both with a term longer than five years, or deposits by Postal Savings Bank of China in amounts of RMB30 million or
      more with a term longer than three years.


From 19 August 2006 to 22 December 2010, the PBOC adjusted the benchmark rate for
RMB-denominated loans and the benchmark rate for RMB-denominated deposits upon 14 occasions
and 13 occasions respectively. Since then and up to 22 December 2010 (the “Latest Practicable Date”),
the PBOC has not adjusted the benchmark rate for RMB-denominated loans and the benchmark rate
for RMB-denominated deposits.




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The following table sets forth the PBOC benchmark rates for Renminbi loans since 19 August 2006.

                                           Six                                                                            Housing
                                        months      One to Three to                            Residential             Provident Fund
                                         to one      three       five                         Mortgage Loans               Loans
                                          year       years      years                 More                More                    More
                                 Six   (inclusive (inclusive (inclusive               than      Five      than           Five     than
                               months of one       of three    of five                 five   years or     five        years or    five
Date of adjustment             or less    year)     years)     years)                 years     less      years          less     years
                                                                     (Interest rate per annum %)
19 August 2006 . .     .   .               5.58         6.12      6.30      6.48      6.84   6.48               6.84       4.14      4.59
18 March 2007 . .      .   .               5.67         6.39      6.57      6.75      7.11   6.75               7.11       4.32      4.77
19 May 2007 . . .      .   .               5.85         6.57      6.75      6.93      7.20   6.93               7.20       4.41      4.86
21 July 2007 . . . .   .   .               6.03         6.84      7.02      7.20      7.38   7.20               7.38       4.50      4.95
22 August 2007 . .     .   .               6.21         7.02      7.20      7.38      7.56   7.38               7.56       4.59      5.04
15 September 2007          .               6.48         7.29      7.47      7.65      7.83   7.65               7.83       4.77      5.22
21 December 2007       .   .               6.57         7.47      7.56      7.74      7.83   7.74               7.83       4.77      5.22
16 September 2008      .   .               6.21         7.20      7.29      7.56      7.74   7.56               7.74       4.59      5.13
9 October 2008 . .     .   .               6.12         6.93      7.02      7.29      7.47   7.29               7.47       4.32      4.86
30 October 2008 .      .   .               6.03         6.66      6.75      7.02      7.20   7.02               7.20       4.05      4.59
27 November 2008       .   .               5.04         5.58      5.67      5.94      6.12   5.94               6.12       3.51      4.05
23 December 2008       .   .               4.86         5.31      5.40      5.76      5.94   5.76               5.94       3.33      3.87
20 October 2010 .      .   .               5.10         5.56      5.60      5.96      6.14   5.96               6.14       3.50      4.05
25 December 2010       .   .               5.35         5.81      5.85      6.22      6.40   5.96               6.14       3.50      4.05


The following table sets forth the PBOC benchmark rates for Renminbi deposits since 19 August 2006.

                                                                                         Time deposits
                                                   Demand      Three       Six                      Two            Three          Five
Date of adjustment                                 deposits    months     months      One year     years           years          years
                                                                          (Interest rate per annum %)
19 August 2006 . .             .   .   .   .   .       0.72       1.80         2.25       2.52           3.06           3.69        4.14
18 March 2007 . . .            .   .   .   .   .       0.72       1.98         2.43       2.79           3.33           3.96        4.41
19 May 2007 . . . .            .   .   .   .   .       0.72       2.07         2.61       3.06           3.69           4.41        4.95
21 July 2007 . . . . .         .   .   .   .   .       0.81       2.34         2.88       3.33           3.96           4.68        5.22
22 August 2007 . .             .   .   .   .   .       0.81       2.61         3.15       3.60           4.23           4.95        5.49
15 September 2007              .   .   .   .   .       0.81       2.88         3.42       3.87           4.50           5.22        5.76
21 December 2007               .   .   .   .   .       0.72       3.33         3.78       4.14           4.68           5.40        5.85
9 October 2008 . . .           .   .   .   .   .       0.72       3.15         3.51       3.87           4.41           5.13        5.58
30 October 2008 . .            .   .   .   .   .       0.72       2.88         3.24       3.60           4.14           4.77        5.13
27 November 2008               .   .   .   .   .       0.36       1.98         2.25       2.52           3.06           3.60        3.87
23 December 2008               .   .   .   .   .       0.36       1.71         1.98       2.25           2.79           3.33        3.60
20 October 2010 . .            .   .   .   .   .       0.36       1.91         2.20       2.50           3.25           3.85        4.20
25 December 2010               .   .   .   .   .       0.36       2.25         2.50       2.75           3.55           4.15        4.55

The PBOC generally does not regulate interest rates for foreign currency-denominated loans or
deposits, except for US dollar-, Hong Kong dollar-, Japanese Yen- and Euro-denominated deposits of
less than US$3 million (or the equivalent) and with a term of one year or less, the maximum interest
rates on which may not exceed the PBOC benchmark rates for small foreign currency deposits.


Commercial banks may determine the discount rate based on the rediscount rate set by the PBOC
provided that the discount rate is not in excess of the PBOC benchmark rates of the same period for
Renminbi loans. On 25 March 2004, the PBOC set the rediscount rate to commercial banks at 3.24 per
cent. per annum, which was raised to 4.32 per cent. on 1 January 2008, lowered to 2.97 per cent. on
27 November 2008 and then further lowered to 1.80 per cent. on 23 December 2008.



                                                                         167
Pricing for Fee- and Commission-based Products and Services

Under the Tentative Administrative Measures on Pricing of Commercial Banking Services jointly
promulgated by the CBRC and the NDRC on 26 June 2003 and effective on 1 October 2003, services
which are subject to governmental pricing guidelines include basic RMB settlement services, such as
bank drafts, bank acceptance drafts, promissory notes, checks, remittances and entrusted collection,
and other services specified by the CBRC and the National Development and Reform Commission (the
NDRC). Fees for other products and services are determined based on market conditions. Commercial
banks are also required to report to the CBRC at least 15 business days prior to the implementation
of any new fee schedules and to post such fee schedules at their business premises at least 10 business
days prior to such implementation.


Required Deposit Reserve

Commercial banks are required to maintain a percentage of their total deposits as reserves with the
PBOC to ensure they have sufficient liquidity to meet customer withdrawals. Currently, large
state-owned commercial banks are required to maintain a deposit reserve according to the relevant
requirements of the PBOC.




                                                 168
Supervision Over Capital Adequacy

Capital Adequacy Guidelines

Commercial banks are required to maintain a minimum capital adequacy ratio of 8 per cent. and a
minimum core capital adequacy ratio of 4 per cent..

Capital adequacy ratio and core capital adequacy ratio are calculated based on the following formulae
under PRC GAAP:

                                                 Capital - capital deductions
Capital adequacy ratio =                                                                           x 100%
                                Risk - weighted assets + 12.5 x capital charge for market risk

                                                    Capital - capital deductions
Core capital adequacy ratio =                                                                        x 100%
                                  Risk - weighted assets + 12.5 x capital charge for market risk


Components of Capital

Regulatory capital is composed of core capital and supplementary capital after subtracting relevant
capital deductions. Supplementary capital may not exceed core capital. Core capital includes the
following:


•    paid-in capital or common shares;

•    capital reserves;

•    surplus and general reserves;


•    retained earnings; and


•    minority interests.

Supplementary capital includes:


•    up to 70 per cent. of the revaluation reserve;

•    the general allowance for impairment losses under the CBRC’s requirements. See “— PRC
     Banking Supervision and Regulation — Loan Classification, Allowances and Write-offs — Loan
     Classification” and “— PRC Banking Supervision and Regulation — Loan Classification,
     Allowances and Write-offs — Loan Allowances”;


•    preferred shares;

•    qualifying bonds convertible into common shares;

•    qualifying subordinated debt;

•    hybrid capital bonds; and




                                                     169
•    changes in fair value (the positive change, but no more than 50 per cent., to the fair value of
     available-for-sale bonds that have been calculated as part of the owners’ equity interests may be
     calculated into supplementary capital; and the negative change to the fair value shall be deducted
     from supplementary capital. When a commercial bank calculates the capital adequacy ratio, it
     shall transfer the fair value of available-for-sale bonds that have been calculated into the capital
     reserves from the core capital into the supplementary capital).

Capital deductions consist of the following:

•    goodwill;

•    equity investments in non-consolidated financial institutions; and


•    capital investments in real estate not used for the bank’s own operations or equity investments
     in non-banking financial institutions and enterprises.

Core capital deductions consist of the following:

•    goodwill;


•    50 per cent. of equity investments in non-consolidated financial institutions; and


•    50 per cent. of capital investments in real estate not used for the bank’s own operations or equity
     investments in non-banking financial institutions and enterprises.




                                                  170
Risk-weighted Assets

The New Capital Adequacy Regulations provide that, for on-balance sheet items, risk-weighted assets
should be calculated by deducting any allowance for impairment losses and then multiplying the
amount by their corresponding risk weighting (after taking into account risk mitigating factors). For
off-balance sheet items, including foreign exchange contracts, interest rate contracts and other
derivative contracts, the nominal principal amount should be first converted to balance sheet credit
equivalent amounts by multiplying such amount by a credit conversion factor. In addition, assets
secured by certain types of pledges or guarantees are allocated the risk weighting applicable to the
pledges or guarantors. Partially pledged or guaranteed loans receive such lower risk weighting only
on the portion of the loan that is pledged or guaranteed. The following table sets forth risk weightings
for different assets.

Risk Weighting                                                      Assets
0% . . . . . . . . . •   cash on hand
                     •   gold
                     •   claims on PRC incorporated commercial banks with an original maturity of
                         four months or less
                    •    claims on the PRC central government or deposits at the PBOC
                    •    claims on the PBOC
                    •    claims on PRC policy banks
                    •    bonds issued by PRC financial asset management companies for the purpose
                         of acquiring non-performing loans from state-owned banks
                    •    claims on non-PRC central governments or central banks in countries or
                         regions where the sovereign or region is rated AA- or above (1)
                    •    claims on multilateral development banks
20% . . . . . . . . •    claims on PRC incorporated commercial banks with an original maturity of
                         more than four months
                    •    claims on non-PRC commercial banks and securities companies incorporated
                         in other countries or regions where the sovereign or region is rated AA- or
                         above (1)
50% . . . . . . . . •    personal residential mortgages
                    •    claims on PRC public-sector entities invested by the PRC central government
                    •    claims on non-PRC public-sector entities invested by governments of
                         countries or regions where the sovereign or region is rated AA- or above (1)
100% . . . . . . . •     all other assets

(1)   These ratings refer to credit ratings of Standard & Poor’s or the equivalent thereof.


Market Risk Capital


Market risk capital refers to the capital that a bank is required to maintain for the market risks relating
to its assets. Market risk refers to the risk of losses in the on- and off-balance sheet asset value arising
from movements in market prices and includes risks relating to interest rate-sensitive financial
instruments and securities under trading accounts, exchange rate risk and commercial banking product
related risks. Since the first quarter of 2005, domestic banks with a total trading books position greater
than the lower of RMB8.5 billion and 10 per cent. of the bank’s total on- and off-balance sheet assets
are required to take into consideration market risk arising from trading activities when determining
capital adequacy.




                                                            171
Issuance of Subordinated Debt and Subordinated Bonds

Since 17 June 2004, PRC commercial banks have been permitted to issue bonds which are
subordinated to the banks’ other liabilities but are senior to the banks’ equity capital, according to the
Measures for Administration on Issuance of Subordinated Bonds of Commercial Banks jointly issued
by the PBOC and the CBRC. PRC commercial banks may, upon approval by the CBRC, include such
subordinated bonds in the banks’ supplementary capital. Subordinated bonds can be issued either in
a public offering in the inter-bank bond market or in a private placement. PRC commercial banks may
not hold an aggregate amount of subordinated debt issued by other banks in excess of 20 per cent. of
their core capital. The issuance of subordinated debt by PRC commercial banks is subject to the
approval of the CBRC. The PBOC regulates the issuance and trading of subordinated bonds in the
inter-bank bond market.

On 12 December 2005, the CBRC issued the Notice Regarding the Issuance of Hybrid Capital Bonds
by Commercial Banks for the Replenishment of Supplementary Capital, permitting eligible
commercial banks to issue hybrid capital bonds in the inter-bank market and include such bonds in
their supplementary capital. The introduction of hybrid capital bonds in the PRC has opened a new
channel for commercial banks to replenish their supplementary capital and improve their capital
adequacy ratio.

On 18 October 2009, the CBRC issued the Notice on Improving the Mechanism for Capital
Replenishment of Commercial Banks which requires major commercial banks and other banks to
maintain a core capital adequacy ratio of no less than 7 per cent. and 5 per cent., respectively, if they
seek to issue long-term subordinated debt for the replenishment of supplementary capital. The major
commercial banks and other banks should not issue long-term subordinated debt which constitutes
more than 25 per cent. and 30 per cent. of their respective core capital. In the calculation of the capital
adequacy ratio, after 18 October 2009, banks should fully deduct any long-term subordinated debt
issued by other banks which they acquired after 1 July 2009.

CBRC Supervision of Capital Adequacy

The CBRC is responsible for supervising the capital adequacy of banking institutions in the PRC. It
reviews and evaluates banking institutions’ capital adequacy through both on-site examination and
off-site surveillance. Commercial banks are required to report to the CBRC their period-end
unconsolidated capital adequacy ratios on a quarterly basis and their consolidated capital adequacy
ratios on a semi-annual basis. Commercial banks are classified into three categories based on their
capital adequacy ratios as follows:

Category                                        Capital adequacy ratio         Core capital adequacy ratio


Adequately capitalised banks . . . . . . .        not less than 8%       and       Not less than 4%
Undercapitalised banks. . . . . . . . . . . .       less than 8%          or        Less than 4%
Significantly undercapitalised banks. .             less than 4%          or        Less than 2%

If a bank is not in compliance with the capital adequacy requirements, depending on the degree of its
undercapitalisation, the CBRC may take various actions, including:

•     issuing a supervisory notice;

•     requiring the bank to submit and implement an acceptable capital replenishment plan within two
      months;

•     restricting asset growth;


                                                       172
•    reducing higher-risk assets;

•    restricting the purchase of fixed assets; and

•    restricting dividends and other forms of distributions.

In addition, depending on the risk level of the bank and its implementation of a capital replenishment
plan, the CBRC may prohibit such bank from establishing new branches or launching new services or
suspend the bank’s entire business (except for low-risk activities).

The CBRC may require significantly undercapitalised banks to take further actions, including changes
to senior management, the transfer of control, the restructuring of operations, or, in the most severe
case, closure in accordance with relevant laws and regulations.

Basel Accords

The Basel Capital Accord, or Basel I, was introduced by the Basel Committee on Banking Supervision,
or the Basel Committee, in 1988. Basel I is a capital measurement system for banks that provides for
the implementation of a credit risk measurement framework with a minimum capital standard of 8 per
cent. Since 1998, the Basel Committee has issued certain proposals for the New Capital Accord, or
Basel II, to replace Basel I. Basel II retains the key elements of Basel I, including the general
requirement for banks to hold total capital equivalent to at least 8 per cent. of their risk-weighted
assets, but seeks to improve the capital framework in various key respects, including (i) establishment
of the “three pillars” framework, namely the first pillar “minimum capital standard”, the second pillar
“supervision and regulation by regulatory authorities” and the third pillar “information disclosure”;
and (ii) introducing material changes to the calculation of capital adequacy and adopting simple to
complicated and diversified approaches.

The CBRC promulgated and amended the New Capital Adequacy Regulations on 23 February 2004 and
3 July 2007, respectively. The CBRC has advised that the New Capital Adequacy Regulations are
based on Basel I while taking into consideration certain aspects of Basel II. On 28 February 2007, the
CBRC issued the Guidelines on Implementation of the New Capital Accord in PRC Banking Industry,
which require large commercial banks, which have set up active operational entities in other countries
or regions (including Hong Kong and Macau) and have a significant international business, to
implement Basel II by the end of 2010 or, upon the CBRC’s approval, no later than the end of 2013.
To facilitate preparations for the implementation of Basel II, the CBRC adopted the first series of
supervision guidelines in respect of implementation of Basel II in September 2008, including the
Guidelines on Classification of Commercial Bank Account Credit Risks Exposure, the Guidelines on
Supervision of Commercial Bank Internal Rating Based System for Credit Risks, the Guidelines on
Computation of Commercial Bank Specialized Loan Regulatory Capital, the Guidelines on
Computation of Commercial Bank Credit Risks Cushion Regulatory Capital, and the Guidelines on
Computation of Commercial Bank Operational Risks Regulatory Capital. In March 2009, China
officially joined the Basel Committee and participated in the establishment of international standards
for banking supervision, which is conducive to the upgrading of supervision techniques and
supervision levels in China’s banking industry.

Since November 2009, the CBRC has issued the following five regulatory guidelines to implement
Basel II: the Guidelines on Disclosure of Capital Adequacy Ratio, the Guidelines on Verification of
Advanced Approaches for Capital Measurement, the Guidelines on Risk Management of Interest Rates
of Commercial Bank Account, the Guidelines on Supervision and Review on Capital Adequacy Ratio,
and the Guidelines on Measurement of Risk Exposure Relating to Assets Securitization. These five
regulatory guidelines facilitate the implementation of Basel II, and one of the guidelines — the
Guidelines on Risk Management of Interest Rates of Commercial Bank Account — also applies to
those banks which have not yet implemented Basel II.


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Loan Classification, Allowance and Write-offs

Loan Classification

Banks in the PRC are currently required to classify loans under a five-category loan classification
system based on the estimated likelihood of repayment of principal and interest according to the
Guidelines of Risk-based Classification of Loans. The five categories are “normal,” “special
mention,” “substandard,” “doubtful” and “loss.” The primary factors for evaluating the likelihood of
repayment include the borrower’s cash flow, financial condition and credit history.

Loan Allowance


According to the Guiding Principles of Risk-based Classification of Loans, a loan classified as
substandard, doubtful or loss is considered to be non-performing, and commercial banks are required
to make provisions based on a reasonable estimate of the probable loss on a prudent and timely basis.
Allowance for impairment losses consists of general allowance, specific allowance and special
allowance. General allowance refers to the allowance for all unidentified but possible losses, which
are made based on certain percentages of the balance of total outstanding loans; specific allowance
refers to the allowance made for specific losses in connection with an individual loan based on its
categorisation under the guiding principles; and special allowance refers to the allowance made for the
risks specifically related to certain countries, regions, industries, or types of loans.


Under the Guidelines on Loan Loss Provisions, commercial banks are required to make provisions for
impairment losses on a quarterly basis and to have a general allowance of not less than 1 per cent. of
the total loans outstanding as of 31 December of any year. The guidelines further provide guidance
on the level of specific provisions as a percentage of the outstanding amount of loans for each loan
category: 2 per cent. for special mention loans; 20-30 per cent. for substandard loans; 40-60 per cent.
for doubtful loans; and 100 per cent. for loss loans. Commercial banks may make special provisions
in accordance with special risk factors (including risks in association with certain industries and
countries), probability of losses and historical experience.

CBRC Supervision of Loan Classification and Loan Allowance


Commercial banks are required to formulate detailed internal procedures that clearly define the
responsibilities of each relevant department with respect to loan classification, approval, review and
related matters. In addition, beginning in 2004, commercial banks have been required to submit
quarterly and annual reports to the CBRC on the classification of their loan portfolios and their
allowance for loan losses. Based on the review of these reports, the CBRC may require commercial
banks to explain significant changes in loan classification and loan loss allowance levels, or may carry
out further inspections.

Loan Write-offs


Under the regulations issued by the CBRC and the MOF, commercial banks are required to establish
a strict examination and approval process to write off loan losses. In order to be written off, a loan
needs to meet the standards set by the MOF. Losses realised upon writing off loans are deductible for
tax purposes, but such deduction is subject to the review and approval of the tax authorities as to
whether the loans written off were in compliance with the MOF’s standards.



                                                  174
Allowance and Statutory General Reserve for Impairment Losses

Pursuant to the Administrative Measures for the Provisioning for Non-performing Assets of Financial
Institutions and the subsequent Notice on Relevant Issues Concerning the Provisioning for
Non-performing Assets, both issued by the MOF, financial institutions in the PRC are required to
maintain adequate allowance for impairment losses. In addition, financial institutions are required to
set up a statutory general reserve to cover potential impairment losses that have yet to be identified.
Financial institutions are required to assess the risk profile of their assets in determining the statutory
general reserve level. In principle, such level shall not be less than 1 per cent. of the aggregate amount
of each financial institution’s risk-bearing assets before allowance for impairment losses at the
balance sheet date. Financial institutions are not allowed to make profit distributions to shareholders
until adequate allowance for impairment losses and statutory general reserve has been made. Financial
institutions which could not meet these requirements in 2005 were required to take necessary steps to
ensure that they could fulfil such requirements within approximately three years, and in any case no
later than five years, from 2005.

Other Operational and Risk Management Ratios

The Core Indicators for the Risk Management of Commercial Banks (for Trial Implementation) (Core
Indicators (Provisional)) promulgated by the CBRC became effective on 1 January 2006.

The following table sets forth the required ratios as provided in the Core Indicators (Provisional):

                                                                                               Requirement
                                       Primary Indicators            Secondary Indicators          (%)

Risk Level
Liquidity risk . . . . . . . . . . Liquidity
                                   ratio                         RMB                                   ≥25
                                                                 Foreign Currency                      ≥25
                                    Core liabilities ratio                                             ≥60
                                    Liquidity gap ratio                                               ≥(10)
Credit risk . . . . . . . . . . . . Non-performing asset ratio                                          ≤4
                                                                 Non-performing loan ratio              ≤5
                                 Credit exposure to a single                                           ≤15
                                 group borrower
                                                                 Loan exposure to a single            ≤10
                                                                 borrower
                                    Overall credit exposure to                                        ≤50
                                    related parties
Market risk . . . . . . . . . . . Cumulative foreign currency                                         ≤20
                                    exposure ratio
Risk Cushion
Profitability . . . . . . . . . . . Cost-to-income ratio                                              ≤45
                                    Return on assets                                                 ≥0.6
                                    Return on capital                                                 ≥11
Allowance adequacy. . . . . Allowance adequacy ratio                                                 >100
                                    for asset impairment
                                                                 Allowance adequacy ratio            >100
                                                                 for loan impairment
Capital adequacy . . . . . . . Capital adequacy ratio                                                   ≥8
                                                                 Core capital adequacy Ratio            ≥4



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The CBRC supervises compliance by commercial banks with risk management ratios set out in the
Core Indicators (Provisional) and takes regulatory action where it deems appropriate. However, the
Core Indicators (Provisional) do not stipulate any penalties for non-compliance.

In addition, the PRC Commercial Banking Law requires that the loan-to-deposit ratio of commercial
banks shall not exceed 75 per cent.. As of 30 September 2010, 30 June 2010 and 31 December 2009,
2008 and 2007, the Bank’s loan-to-deposit ratios were 59.2, 59.5, 59.5, 56.4 and 56.3 per cent.,
respectively, which all comply with such requirement.

Corporate Governance and Internal Control

Corporate Governance

The PRC Company Law, the PRC Commercial Banking Law and other laws, regulations and regulatory
documents provide for specific requirements relating to corporate governance, of which the
Guidelines on Corporate Governance of Joint Stock Commercial Banks set out standards for corporate
governance best practice for PRC joint stock companies. Under the guidelines, PRC joint stock
commercial banks should establish a sound corporate governance system and a clear organisational
structure, with management and supervisory powers, functions and responsibilities being clearly
divided among the shareholders meeting, the board of directors, the board of supervisors and the
senior management. In addition, the Guidelines on Independent Directors and External Supervisors of
Joint Stock Commercial Banks recommend that the board of directors of a commercial bank should
have at least two independent directors, and the Guidelines on the Establishment of a System of
Independent Directors by Listed Companies require that at least one-third of the board members of a
PRC listed company should be independent directors. The Guidelines on Corporate Governance of
Joint Stock Commercial Banks recommend that senior management should comprise at least
one-quarter but not more than one-third of the board of directors. The Guidelines on the Corporate
Governance and other Regulatory Issues regarding state-owned Commercial Banks provide that
shareholders’ general meetings are the governing bodies of the state-owned commercial banks and
shareholders of state-owned commercial banks shall exercise their rights through shareholders’
general meetings and comply with laws, regulations and their own articles of association. In addition,
these guidelines set out, among other things, general principles of corporate governance applicable to
the Large Commercial Banks.

In addition to the general qualification requirements applicable to directors and senior management
of bank institutions under the PRC Company Law, the PRC Commercial Banking Law and other
regulations and rules, the CBRC also sets out certain specific qualification requirements applicable to
directors and senior management.

Internal Control

Under the Internal Control Guidelines for Commercial Banks issued by the PBOC and the CBRC in
2002 and 2007 respectively, commercial banks are required to establish internal controls to ensure
effective risk management for their business activities. PRC commercial banks are also required to
establish a risk management department that formulates and implements risk management policies and
procedures. In addition, PRC banks are required to establish an internal audit department that can
independently supervise and evaluate all aspects of their operations.

On 25 December 2004, the CBRC published the Interim Measures for the Evaluation of the Internal
Control Systems of Commercial Banks which set forth the procedures, measures and ranking standards
for the CBRC’s internal control evaluation of commercial banks. In the event of non-compliance with


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the Interim Measures for the Evaluation of Internal Control, the CBRC may impose sanctions
including, among others, requesting a change of the bank’s senior management, suspending the bank’s
business, revoking the practice licences of persons involved, or delaying approval of, or rejecting
applications for, the establishment of new branch outlets or new business.

On 27 June 2006, the CBRC issued the Guidelines on Internal Audit for Banking Institutions which
became effective on 1 July 2006. Pursuant to the guidelines, banks are required to establish an audit
committee of the board with at least three members, a majority of whom must be non-executive
directors. Banks are also required to have an internal audit department with employees who meet
certain qualifications, in principle representing no less than 1 per cent. of the bank’s total number of
employees.

On 22 May 2008, the Basic Rules on Enterprise Internal Control were issued jointly by the MOF, the
CBRC, the NAO, the CSRC and the CIRC and became effective on 1 July 2009. The rules require
enterprises to establish and implement internal control systems, utilise information technology to
strengthen internal control, and establish information systems addressing their operational and
management needs, among other matters.

Information Disclosure Requirements

On 3 July 2007, the CBRC issued the Measures for the Information Disclosure of Commercial Banks
which became effective on the same day. Under the measures, a PRC commercial bank is required to
publish an audited annual report within four months after the end of each financial year, disclosing
its financial position and operational results.

The Information Disclosure Rules on Companies Publicly Offering Securities No.26 — Special
Disclosure Rules on Commercial Banks, which were issued by the CSRC and became effective on 1
September 2008, set out guidelines on information disclosure, including financial and risk-related
disclosure by commercial banks offering securities to the public. The rules also require commercial
banks to publish announcements in relation to certain events which may have a material impact on
their operational capability or profitability.

Apart from the disclosure requirements above, PRC-listed commercial banks are also required to
comply with the relevant disclosure requirements imposed by the CSRC through the Administrative
Measures on Listed Companies Information Disclosure and the relevant stock exchanges.

Transactions with Related Parties

Apart from the general rules regarding related party transactions issued by the CSRC and the relevant
stock exchanges, the CBRC promulgated the Administrative Measures for Related Party Transactions
between Commercial Banks and their Insiders or Shareholders in April 2004, which imposed more
stringent and detailed requirements on related party transactions of PRC commercial banks. The
measures require PRC commercial banks to adhere to the principles of honesty and fairness in
conducting related party transactions. PRC commercial banks are not allowed to grant unsecured loans
to related parties or grant secured loans to related parties on terms more favourable than those offered
to other third party borrowers.

The measures also set out detailed provisions on the definition of a related party, the form and content
of a related party transaction as well as the procedures and principles which must be followed for
related party transactions.


                                                  177
Pursuant to the measures, commercial banks must submit to the CBRC, on a quarterly basis, status
reports regarding their related party transactions, as well as disclose matters relating to related parties
and related party transactions in their financial statements. Furthermore, the board of directors is
required to report related party transactions and the implementation of mechanisms for the monitoring
and approval of such transactions annually at shareholder meetings. The CBRC has the power to
require the rectification of transactions that violate the measures and to impose sanctions on the bank
and/or the related parties.

Risk Management

Since its inception, the CBRC has published numerous risk management guidelines and rules in an
effort to improve risk management of PRC commercial banks, including credit risk management,
operational risk management, market risk management, compliance risk management and the risk
rating system, in addition to guidelines concerning loan and credit to certain specific industries and
customers and guidelines in respect of the implementation of Basel II, see “— Regulation of Principal
Commercial Banking Activities — Lending” and “— Supervision over Capital Adequacy — Basel
Accords”. The CBRC also promulgated the Core Indicators (Provisional) as a basis of supervising the
risk management of PRC commercial banks. The CBRC established requirements for certain ratios
relating to risk levels and risk provisions in the Core Indicators (Provisional) and is expected to
establish requirements for certain ratios relating to risk mitigation for the purpose of evaluating and
monitoring the risks of PRC commercial banks. See “— PRC Banking Supervision and Regulation —
Other Operational and Risk Management Ratios”. The CBRC periodically collects data through
off-site surveillance to analyse such indicators and evaluate and issue early warnings of the risks on
a timely basis.

Operational Risk Management

On 22 March 2005, the CBRC issued the Circular on Strengthening Control of Operational Risk to
further strengthen PRC commercial banks’ ability to identify, manage and control operational risks.
Under this circular, commercial banks are required to establish internal policies and procedures
specifically for the management and control of operational risks. A bank’s internal audit department
and business operations department are required to conduct independent and ad hoc reviews and
examinations of the bank’s business operations from time to time, and ongoing reviews and
examinations of business areas involving a greater degree of operational risks. Moreover, a
commercial bank’s head office is required to assess the implementation of, and compliance with, its
internal policies and procedures on operational risks.

In addition, the circular sets out detailed requirements relating to, among other things, establishing a
system under which branch officers responsible for business operations are required to rotate on a
regular basis; establishing a system to encourage employees to fully comply with applicable
regulations and internal rules and policies; improving the regular checking of account balances
between PRC commercial banks and their customers; improving the timely checking of the banks’
internal accounting; segregating persons responsible for book-keeping from those responsible for
account reconciliation; and establishing a system to strictly control and manage the use and keeping
of chops, specimen signatures and evidential vouchers.

Furthermore, on 14 May 2007, the CBRC issued the Guidelines on Operational Risk Management of
Commercial Banks to enhance risk management abilities of the PRC commercial banks. These
guidelines mainly address, among other things, the supervision and control of the board of directors,
responsibilities of senior management, proper organisational structure, and policies, approaches and


                                                   178
procedures for operational risk management. Those policies and procedures shall be submitted to the
CBRC for filing. If a commercial bank incurs a significant operational incident and fails to adopt
effective corrective measures within a required period, the CBRC shall take relevant regulatory
measures.

Market Risk Management

On 29 December 2004, the CBRC promulgated the Guidelines on the Market Risk Management of
Commercial Banks, which became effective on 1 March 2005, to strengthen the market risk
management of PRC commercial banks. These guidelines mainly address, among other things, (i) the
responsibilities of the board of directors and the senior management in supervising market risk
management, (ii) the policies and procedures for market risk management, (iii) the detection,
quantification, monitoring and control of market risk, and (iv) the responsibilities for internal control
and conducting external audits.

Compliance Risk Management

In order to strengthen the compliance risk management of commercial banks and maintain the safety
and stability of the operations of PRC commercial banks, the CBRC promulgated the Guidelines on
Compliance Risk Management of Commercial Banks on 20 October 2006. These guidelines have
clarified the responsibilities of the board of directors and the senior management of a PRC commercial
bank with respect to compliance risk management, standardised the organisational structure for
compliance risk management and set out the regulatory mechanisms for a bank’s risk management.

Risk Rating System

Joint stock commercial banks in the PRC are subject to evaluation by the CBRC based on a provisional
risk rating system. Under this system, the capital adequacy, asset quality, management quality,
profitability, liquidity and exposure to market risk of PRC joint stock commercial banks are evaluated
and scored by the CBRC on a continuous basis. Each bank is classified into one of five risk rating
categories based on its scores. The CBRC’s supervisory activities in respect of a certain bank,
including the frequency and scope of its on-site examinations, depend on such bank’s risk rating
category. Such risk rating also forms the basis for the CBRC’s evaluation of a bank’s applications for
new business licences and its senior management qualification. These risk ratings are currently not
publicly available.

Anti-money Laundering Regulation

The PRC Anti-money Laundering Law, which became effective on 1 January 2007, sets out the
responsibilities of the relevant financial regulatory authorities regarding anti-money laundering,
including participating in the formulation of the rules and regulations regarding anti-money
laundering activities of the financial institutions which they regulate and requiring financial
institutions to establish sound internal control systems regarding anti-money laundering. To facilitate
the implementation of the PRC Anti-money Laundering Law, the PBOC promulgated the Anti-money
Laundering Regulations for Financial Institutions which also became effective on 1 January 2007.
According to these regulations, PRC commercial banks are required to establish an internal
anti-money laundering procedure and either establish an independent anti-money laundering
department or designate a relevant department to implement their anti-money laundering procedures.
PRC commercial banks are required to establish a customer identification system in accordance with
the Measures on the Administration of Customer Identity Identification and Materials and Transaction
Recording of Financial Institutions promulgated jointly by the PBOC, the CBRC, the CSRC and the
CIRC, which became effective on 1 August 2007. PRC commercial banks are also required to record
the identities of all customers and the information relating to each transaction and keep retail


                                                  179
transaction documents and books. In accordance with the Administrative Measures for the Financial
Institutions’ Report of Large Transactions and Suspicious Transactions promulgated by the PBOC,
which became effective on 1 March 2007, upon the detection of any suspicious transactions or
transactions involving large amounts, PRC commercial banks are required to report the transactions
to the PBOC or the SAFE, as applicable. Where necessary and pursuant to appropriate judicial
proceedings, PRC commercial banks are required to cooperate with government authorities in
preventing money laundering activities and freezing assets. The PBOC supervises and conducts
on-site examinations of PRC commercial banks’ compliance with its anti-money laundering
regulations, and may impose penalties for any violations thereof in accordance with the PRC
Anti-money Laundering Law.

Restrictions on Investments

Under the PRC Commercial Banking Law, commercial banks are not permitted to engage in trust
investment or securities business, invest in real property other than for their own use, or invest in
non-banking financial institutions and enterprises, unless otherwise approved by the relevant
government authorities. The use of funds by commercial banks is limited to the following:

•    short-term, medium-term and long-term loans;

•    discounts on negotiable instruments;

•    inter-bank loans;

•    trading of government bonds;

•    trading of bonds from financial institutions;

•    investment in banking institutions; and

•    other uses as may be approved by the relevant government authorities.

Upon obtaining approvals from relevant authorities, including the CBRC, commercial banks are
permitted to invest in insurance companies, fund management companies and financial leasing
companies.

On 20 February 2005, the PBOC, the CBRC and the CSRC jointly promulgated and implemented the
Pilot Administrative Measures on Establishment of Funds Management Companies by Commercial
Banks, pursuant to which state-owned commercial banks and joint stock commercial banks are
allowed to set up or acquire fund management companies after obtaining approvals from the CBRC
and the CSRC. In addition, commercial banks shall adopt effective measures to prevent risks
associated with capital markets and banking industry.

In accordance with the Administrative Measures on Financial Leasing Companies which were
amended by the CBRC in 2007, commercial banks can invest in financial leasing companies where
commercial banks are able to meet relevant requirements for capital adequacy, profitability, corporate
governance and other matters.

On 5 November 2009, the CBRC enacted the Pilot Administrative Measures on Investment by
Commercial Banks in Insurance Companies. These pilot administrative measures require a pilot plan
for investment by a commercial bank in an insurance company to be filed to the relevant regulator for


                                                 180
the approval of the State Council. Each commercial bank is allowed to invest in one insurance
company only. The pilot administrative measures also set out rules for the qualifications of a
commercial bank which intends to invest in an insurance company, and for the target insurance
company.


Supervision and regulation of the Bank’s overseas operations

The Bank’s branch in Singapore is subject to the regulation of the Monetary Authority of Singapore.
The Bank is duly licensed to operate in Singapore by the CBRC and PBOC.

Banking activities in Singapore are primarily governed by the Singapore Banking Act and are
regulated by the Monetary Authority of Singapore. The principal functions of the Monetary Authority
of Singapore are to (i) act as the central bank of Singapore, including the conduct of monetary policy,
the issuance of currency, the oversight of payment systems and serving as banker to and financial
agent of the Singapore government; (ii) conduct integrated supervision of financial services and
financial stability surveillance; (iii) manage the official foreign reserves of Singapore; and (iv)
develop Singapore as an international financial centre.

As at 30 June 2010, the Bank had 181 overseas branches, subsidiaries, representative offices and
outlets located in 22 countries and regions such as Hong Kong, Macau, Korea, Japan, Vietnam,
Singapore, Indonesia, Malaysia, Thailand, United Arab Emirates, Qatar, Kazakhstan, United Kingdom,
Germany, Luxembourg, Russia, Australia, United States and Canada. In addition, in January 2011, the
Bank set up branches in France, Spain, Italy, Belgium and the Netherlands.. These branches, offices
and outlets are subject to the regulation of the applicable local regulatory authorities and to the local
banking regulatory requirements, including requirements with respect to, among other things, internal
control and capital adequacy.




                                                  181
                                           TAXATION

 The information provided below does not purport to be a complete summary of PRC or Singapore
 tax laws and practice currently applicable. It does not purport to be comprehensive and does not
 constitute legal or tax advice. It does not consider any investor’s particular circumstances.

 Prospective purchasers should consult their own professional advisors concerning the application
 of PRC and Singapore tax laws to their particular situations as well as any tax consequences
 arising under the laws of any other jurisdiction.

PRC Taxation

In the opinion of Jun He Law Offices, the Bank’s PRC tax counsel, the following summary accurately
describes the principal PRC tax consequences of ownership of the Notes by individual or corporate
beneficial owners who, or which, are not residents of mainland China for PRC tax purposes (referred
to in this PRC Taxation section as “non-resident individuals” and “non-resident enterprises”,
respectively, and together, “non-PRC holders”). Reference is also made to the arrangement for the
avoidance of double taxation between mainland China and Hong Kong SAR (the “PRC-HK Tax
Arrangement”) with respect to Hong Kong SAR taxes from the year of assessment beginning on or
after 1 April 2009 and with respect to PRC taxes from the taxable year beginning on or after 1 January
2010.

This summary has been prepared based on Chinese tax laws and practices in force as of the date of
this Programme and is subject to change after such date.

PRC withholding tax on interest

Pursuant to the PRC Enterprise Income Tax Law and the PRC Individual Income Tax Law and their
respective implementation rules, a 10% withholding tax is levied on the payment of mainland China
sourced interest in respect of debt securities payable to non-resident enterprises (including Hong Kong
SAR resident enterprises) and non-resident individuals (including Hong Kong SAR residents). In the
absence of applicable tax treaty protections, the current rates of such withholding tax on the gross
amount of the interest are 20 per cent for non-resident individuals, and 10 per cent for non-resident
enterprises. However, the tax so charged on interest, if deemed PRC-source income, paid on the Notes
to non-PRC holders who, or which, are residents of Hong Kong SAR (including enterprise holders and
individual holders) for purposes of the PRC-HK Tax Arrangement will be 7 per cent of the gross
amount of the interest if the holders would qualify as beneficial owners of such interest pursuant to
the PRC-HK Tax Arrangement, and relevant interpretation of the tax arrangement formulated by the
PRC State Administration of Taxation.

The interest payable by the Bank to non-PRC holders in respect of the Notes would be considered as
non-PRC-sourced income of these non-PRC holders, and therefore China would not tax such interest
payment. It is quite clear that under the income sourcing rules under the PRC domestic tax law and
the applicable tax treaty (or its equivalent), China should not impose withholding tax on the interest
payable by the Bank in respect of the Notes. However, this is subject to interpretation by the PRC tax
authorities. In the event that the PRC tax authorities may take an aggressive position that China has
the right to impose withholding tax on such interest, the Bank will pay additional amounts to the
non-PRC holders so that they receive the full amount of the scheduled payment, as further set out in
the terms and conditions of the Notes.

PRC withholding tax on capital gains

If the capital gains realized by the non-PRC Holders are determined as income sourced in the PRC by
PRC tax authorities, the non-PRC holders which realize capital gains from disposing the Notes may
be subject to a 10 per cent withholding tax on such capital gains, unless there is an applicable tax
treaty between the PRC and the jurisdiction in which the relevant non-PRC holders reside and such


                                                 182
tax treaty reduces or exempts withholding tax on capital gains payable to the non-PRC holders. Under
the PRC Enterprise Income Tax Law and its implementation rules, the taxable income will be the
balance of the total gains realized from the transfer of the Notes minus all the associated costs and
expenses that are permitted under PRC tax laws to be deducted from the capital gains.

However, the capital gains to be realized by non-PRC holders from disposition of the Notes should
be considered as non-PRC-sourced income of these non-PRC holders, and therefore China would not
tax such capital gains in the hands of the non-PRC holders. It is quite clear that under the income
sourcing rules under the PRC domestic tax law and the applicable tax treaty (or its equivalent), China
should not impose withholding tax on such capital gains. However, this is subject to interpretation by
tax authorities.

Singapore Taxation

 The statements below are only applicable to Notes issued by the Bank, acting through its Singapore
 branch, and are based on certain aspects of current tax laws in Singapore and administrative
 guidelines issued by Monetary Authority of Singapore (MAS) in force as at the date of this Offering
 Circular, and are subject to any changes in such laws or administrative guidelines, or the
 interpretation of those laws or guidelines, occurring after such date, which changes could be made
 on a retroactive basis.

Interest and other Payments

Under section 12(6) of the Income Tax Act, Chapter 134 of Singapore (the ITA), the following
payments are deemed to be derived from Singapore:

(a)   any interest, commissions, fees or any other payment in connection with any loan or indebtedness
      or with any arrangement, management, guarantee or service relating to any loan or indebtedness
      which is:

      borne, directly or indirectly, by a person resident in Singapore or a permanent establishment in
      Singapore (except in respect of any business carried on outside Singapore through a permanent
      establishment outside Singapore or any immovable property situated outside Singapore); or

      deductible against any income accruing in or derived from Singapore; or

(b)   any income derived from loans where the funds provided by such loans are brought into or used
      in Singapore.

Such payments, where made to a person not known to be a resident in Singapore for tax purposes, are
generally subject to withholding of Singapore tax. The rate at which tax is withheld for such payments
(other than those subject to the 15 per cent. final withholding tax described below) to non-resident
persons other than non-resident individuals is 17 per cent. for the year of assessment 2010 (that is, in
respect of the income earned during the calendar year or other basis period ended in 2009). The
applicable rate for non-resident individuals is 20 per cent. However, if the payment is derived by a
person not resident in Singapore otherwise than from its trade, business, profession or vocation carried
on or exercised in Singapore and is not effectively connected with any permanent establishment in
Singapore of that person, the payment is subject to a final withholding tax rate of 15 per cent. The rate
of 15 per cent. may be reduced by applicable tax treaties.

Certain Singapore-sourced investment income derived by individuals, including interest, discount
income (not including discount income from secondary trading), prepayment fees, redemption
premium and break cost from debt securities, is exempt from tax, except where such income is derived
through a partnership in Singapore or is derived from the carrying on of a trade, business or profession
in Singapore.


                                                  183
In addition, as the Programme as a whole is arranged by Standard Chartered Bank, Singapore Branch,
which is a Financial Sector Incentive (Bond Market) Company (as defined in the ITA), Notes issued
under the Programme during the period from the date of this Offering Circular to 31 December 2013
(Relevant Notes) would, for the purposes of the ITA, be “qualifying debt securities” to which the
following treatments shall apply:


(a)   subject to certain conditions having been fulfilled (including (1) the furnishing to the
      Comptroller of Income Tax in Singapore (Comptroller) and the MAS of a Return on Debt
      securities for the Relevant Notes within a specified period, and (2) the inclusion by the Bank in
      all offering documents relating to the Relevant Notes of a statement to the effect that where
      interest, discount income, prepayment fee, redemption premium or break cost is derived by a
      person who is not resident in Singapore and who carries on any operation in Singapore through
      a permanent establishment in Singapore, the tax exemption shall not apply if the non-resident
      person acquires the Relevant Notes using funds from that person’s operations through the
      Singapore permanent establishment), interest, discount income (not including discount income
      arising from secondary trading), prepayment fee, redemption premium and break cost
      (collectively, Qualifying Income) from the Relevant Notes derived by a Noteholder who is not
      resident in Singapore and:


      who does not have any permanent establishment in Singapore; or


      carries on any operation in Singapore through a permanent establishment in Singapore but where
      the funds used by that person to acquire the Relevant Notes are not obtained from the operation
      of the Singapore permanent establishment,


      are exempt from Singapore tax;

(b)   subject to certain conditions having been fulfilled (including the furnishing to the Comptroller
      and the MAS of a Return on Debt securities for the Relevant Notes within a specified period),
      Qualifying Income from the Relevant Notes derived by any company or a body of persons in
      Singapore is subject to tax at a concessionary rate of 10% (for this purpose, a body of persons
      is defined in the ITA to include any body politic, corporate or collegiate and any fraternity,
      fellowship or society of persons whether corporate or not corporate, but excluding a company or
      partnership);

(c)   subject to:

      the Bank including in all offering documents relating to the Relevant Notes a statement to the
      effect that any person whose interest, discount income, prepayment fee, redemption premium or
      break cost derived from the Relevant Notes is not exempt from tax shall declare and include such
      income in a return of income made under the ITA; and


      the furnishing to the Comptroller and the MAS of a Return on debt securities for the Relevant
      Notes within a specified period,

      Qualifying Income derived from the Relevant Notes is not subject to the withholding of tax by
      the Bank.




                                                  184
However, notwithstanding the foregoing:

(a)   if during the primary launch of any tranche of Relevant Notes, such Relevant Notes are issued
      to fewer than four persons and 50 per cent. or more of the issue of such Relevant Notes is
      beneficially held or funded, directly or indirectly, by related parties of the Bank, such Relevant
      Notes would not qualify as “qualifying debt securities”; and

(b)   even though a particular tranche of Relevant Notes qualifies as “qualifying debt securities”, if,
      at any time during the tenure of such tranche of Relevant Notes, 50 per cent. or more of the issue
      of such Relevant Notes is held beneficially or funded, directly or indirectly, by any related
      party(ies) of the Bank,

      Qualifying Income derived by:

      any related party of the Bank; or

      any other person where the funds used by such person to acquire such Relevant Notes are
      obtained, directly or indirectly, from any related party of the Bank,

      shall not be eligible for the tax exemption or the concessionary rate of tax of 10 per cent.
      described in the preceding paragraphs.

The term related party, in relation to a person, means any other person who, directly or indirectly,
controls that person, or is controlled, directly or indirectly, by that person, or where he and that other
person, directly or indirectly, are under the control of a common person.

The terms “break cost”, “prepayment fee” and “redemption premium” are defined in the ITA in
relation to debt securities and qualifying debt securities, as follows:

break cost means any fee payable by the issuer of the securities on the early redemption of the
securities, the amount of which is determined by any loss or liability incurred by the holder of the
securities in connection with such redemption;

prepayment fee means any fee payable by the issuer of the securities on the early redemption of the
securities, the amount of which is determined by the terms of the issuance of the securities; and

redemption premium, in relation to debt securities and qualifying debt securities, means any
premium payable by the issuer of the securities on the redemption of the securities upon their maturity.

These terms have the same meanings in this Singapore tax disclosure as in the ITA.

Notwithstanding that the Bank is permitted to make payments of interest, discount income,
prepayment fee, redemption premium and break cost in respect of the Relevant Notes without
deduction or withholding for tax under Sections 45 and 45A of the ITA, any person whose interest,
discount income, prepayment fee, redemption premium or break cost derived from the Relevant Notes
is not exempt from tax is required to declare and include such income in a return of income made
under the ITA.

Enhanced tax incentives for certain long-term qualifying debt securities

Notwithstanding the preceding paragraphs, Qualifying Income derived by Singapore investors from
qualifying debt securities (excluding Singapore Government Securities) which:

(a)   have an original maturity of not less than 10 years;


                                                   185
(b)   cannot be redeemed, called, exchanged or converted within 10 years from the date of their issue;
      and

(c)   cannot be re-opened with a resulting tenure of less than 10 years to the original maturity date,

may enjoy tax exemption instead of the 10 per cent. concessionary tax rate described above, subject
to the terms and conditions described above.

The Singapore Government announced on 18 February 2011 during the Budget 2011 speech a proposal
that payments of interest or other amounts falling within Section 12(6) of the ITA made by (amongst
other persons) banks licensed under the Banking Act, Chapter 19 to persons who are not tax resident
in Singapore (other than Singapore permanent establishments) will be exempt from withholding tax,
provided that the payments are made for the purpose of the licensed bank’s trade or business.

The proposed new tax exemption applies to payments made:

(a)   during the period from 1 April 2011 to 31 March 2021 (both dates inclusive) on contracts which
      take effect before 1 April 2011; and

(b)   payments liable to be made on contracts which take effect between 1 April 2011 to 31 March
      2021 (both dates inclusive).

Full details of the proposed new tax exemption are not yet available, nor has it been enacted into law
as at the date of this Offering Circular.

Capital gains

Any gains considered to be in the nature of capital made from the sale of the Notes will not be taxable
in Singapore. However, any gains from the sale of Notes which are gains from any trade, business,
profession or vocation carried on by that person, if accruing in or derived from Singapore, may be
taxable as such gains are considered revenue in nature.

Holders of the Notes who are applying FRS 39 — Financial Instruments: Recognition and
Measurement (FRS 39) for Singapore income tax purposes may be required to recognise gains or
losses (not being gains or losses in the nature of capital) on the Notes, irrespective of disposal, in
accordance with FRS 39. Please see the section below on “— Adoption of FRS 39 treatment for
Singapore income tax purposes”.

Adoption of FRS 39 treatment for Singapore income tax purposes

The Inland Revenue Authority of Singapore has issued a circular entitled “Income Tax Implications
arising from the adoption of FRS 39 — Financial Instruments: Recognition and Measurement” (the
FRS 39 Circular). The ITA has since been amended to give legislative effect to the FRS 39 Circular.

The tax treatments in the FRS 39 Circular generally apply, subject to certain “opt-out” provisions, to
taxpayers who are required to comply with FRS 39 for financial reporting purposes.

Holders of the Notes who may be subject to the tax treatment under the FRS 39 Circular should consult
their own accounting and tax advisers regarding the Singapore income tax consequences of their
acquisition, holding or disposal of the Notes.

EU Savings Directive

Under EC Council Directive 2003/48/EC on the taxation of savings income, each Member State is
required to provide to the tax authorities of another Member State details of payments of interest (or


                                                 186
similar income) paid by a person within its jurisdiction to an individual resident in that other Member
State or to certain limited types of entities established in that other Member State. However, for a
transitional period, Luxembourg and Austria are instead required (unless during that period they elect
otherwise) to operate a withholding system in relation to such payments (the ending of such
transitional period being dependent upon the conclusion of certain other agreements relating to
information exchange with certain other countries). A number of non-European Union countries and
territories including Switzerland have adopted similar measures (a withholding system in the case of
Switzerland).

The European Commission has proposed certain amendments to the Directive, which may, if
implemented, amend or broaden the scope of the requirements described above.




                                                 187
                                 SUBSCRIPTION AND SALE

The Dealers have, in a programme agreement (the Programme Agreement) dated 25 March 2011,
agreed with the Bank a basis upon which they or any of them may from time to time agree to purchase
Notes. Any such agreement will extend to those matters stated under “Form of the Notes” and “Terms
and Conditions of the Notes”. In the Programme Agreement, the Bank has agreed to reimburse the
Dealers for certain of their expenses in connection with the establishment and any future update of the
Programme and the issue of Notes under the Programme and to indemnify the Dealers against certain
liabilities incurred by them in connection therewith.

United States

The Notes have not been and will not be registered under the Securities Act and may not be offered
or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain
transactions exempt from the registration requirements of the Securities Act. Terms used in this
paragraph have the meanings given to them by Regulation S under the Securities Act.

The Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within
the United States or its possessions or to a United States person, except in certain transactions
permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by
the U.S. Internal Revenue Code of 1986 and regulations thereunder.

Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will
be required to represent and agree, that it will not offer, sell or deliver such Notes (i) as part of their
distribution at any time or (ii) otherwise until 40 days after the completion of the distribution, as
determined and certified by the relevant Dealer or, in the case of an issue of Notes on a syndicated
basis, the relevant lead manager, of all Notes of the Tranche of which such Notes are a part, within
the United States or to, or for the account or benefit of, U.S. persons. Each Dealer has further agreed,
and each further Dealer appointed under the Programme will be required to agree, that it will send to
each dealer to which it sells any Notes during the distribution compliance period a confirmation or
other notice setting forth the restrictions on offers and sales of the Notes within the United States or
to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meanings
given to them by Regulation S under the Securities Act.

Until 40 days after the commencement of the offering of any Series of Notes, an offer or sale of such
Notes within the United States by any dealer (whether or not participating in the offering) may violate
the registration requirements of the Securities Act if such offer or sale is made otherwise than in
accordance with an available exemption from registration under the Securities Act.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the
Prospectus Directive (each, a Relevant Member State), each Dealer has represented and agreed, and
each further Dealer appointed under the Programme will be required to represent and agree, that with
effect from and including the date on which the Prospectus Directive is implemented in that Relevant
Member State (the Relevant Implementation Date) it has not made and will not make an offer of
Notes which are the subject of the offering contemplated by this Offering Circular as completed by
the final terms in relation thereto to the public in that Relevant Member State except that it may, with
effect from and including the Relevant Implementation Date, make an offer of such Notes to the public
in that Relevant Member State:

(a)   if the final terms in relation to the Notes specify that an offer of those Notes may be made other
      than pursuant to Article 3(2) of the Prospectus Directive in that Relevant Member State (a


                                                   188
      Non-exempt Offer), following the date of publication of a prospectus in relation to such Notes
      which has been approved by the competent authority in that Relevant Member State or, where
      appropriate, approved in another Relevant Member State and notified to the competent authority
      in that Relevant Member State, provided that any such prospectus has subsequently been
      completed by the final terms contemplating such Non-exempt Offer, in accordance with the
      Prospectus Directive, in the period beginning and ending on the dates specified in such
      prospectus or final terms, as applicable, and the Bank has consented in writing to its use for the
      purpose of that Non-exempt Offer;

(b)   at any time to any legal entity which is a qualified investor as defined in the Prospectus
      Directive;

(c)   at any time to fewer than 100 or, if the Relevant Member State has implemented the relevant
      provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified
      investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the
      relevant Dealer or Dealers nominated by the Bank for any such offer; or

(d)   at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of Notes referred to in (b) to (d) above shall require the Bank or any Dealer
to publish a prospectus pursuant to Article 3 of the Prospectus Directive, or supplement a prospectus
pursuant to Article 16 of the Prospectus Directive.

For the purposes of this provision, the expression an offer of Notes to the public in relation to any
Notes in any Relevant Member State means the communication in any form and by any means of
sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor
to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any
measure implementing the Prospectus Directive in that Member State, the expression Prospectus
Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending
Directive, to the extent implemented in the Relevant Member State), and includes any relevant
implementing measure in the Relevant Member State and the expression 2010 PD Amending
Directive means Directive 2010/73/EU.

United Kingdom

Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will
be required to represent and agree, that:

(a)   in relation to any Notes which have a maturity of less than one year, (i) it is a person whose
      ordinary activities involve it in acquiring, holding, managing or disposing of investments (as
      principal or agent) for the purposes of its business and (ii) it has not offered or sold and will not
      offer or sell any Notes other than to persons whose ordinary activities involve them in acquiring,
      holding, managing or disposing of investments (as principal or as agent) for the purposes of their
      businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments
      (as principal or agent) for the purposes of their businesses where the issue of the Notes would
      otherwise constitute a contravention of Section 19 of the Financial Services and Markets Act
      2000 (FSMA) by the Bank;

(b)   it has only communicated or caused to be communicated and will only communicate or cause to
      be communicated an invitation or inducement to engage in investment activity (within the
      meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any
      Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Bank; and


                                                   189
(c)   it has complied and will comply with all applicable provisions of the FSMA with respect to
      anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.

Japan

The Notes have not been and will not be registered under the Financial Instruments and Exchange Law
of Japan (Law No. 25 of 1948, as amended; the FIEL) and each Dealer has represented and agreed,
and each further Dealer appointed under the Programme will be required to represent and agree, that
it will not offer or sell any Notes, directly or indirectly, in Japan or to, or for the benefit of, any
resident of Japan (which term as used herein means any person resident in Japan, including any
corporation or other entity organised under the laws of Japan), or to others for re-offering or resale,
directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan, except pursuant to an
exemption from the registration requirements of, and otherwise in compliance with, the FIEL and any
other applicable laws, regulations and ministerial guidelines of Japan.

Hong Kong

Each Dealer has represented, warranted and agreed, and each further Dealer appointed under the
Programme will be required to represent and agree, that:

(a)   it has not offered or sold and will not offer or sell in Hong Kong, by means of any document,
      any Notes other than (i) to persons whose ordinary business is to buy or sell shares or debentures
      (whether as principal or agent), (ii) to “professional investors” as defined in the Securities and
      Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance, or (iii)
      in other circumstances which do not result in the document being a “prospectus” as defined in
      the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the
      public within the meaning of that Ordinance; and

(b)   it has not issued or does not have in its possession for the purposes of issue, and will not issue
      or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any
      advertisement, invitation or document relating to the Notes, which is directed at, or the contents
      of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to
      do so under the securities laws of Hong Kong) other than with respect to Notes which are or are
      intended to be disposed of only to persons outside Hong Kong or only to “professional investors”
      as defined within the Securities and Futures Ordinance and any rules made under that Ordinance.

Singapore

Each Dealer has acknowledged that this Offering Circular has not been registered as a prospectus with
the Monetary Authority of Singapore under the Securities and Futures Act, Chapter 289 of Singapore
(the Securities and Futures Act). Accordingly, each Dealer has represented, warranted and agreed,
and each future Dealer appointed under the Programme will be required to represent and agree, that
the Notes may not be offered or sold or made the subject of an invitation for subscription or purchase,
nor may the Offering Circular or any other document or material in connection with the offer or sale
or invitation for subscription or purchase of any Notes be circulated or distributed, whether directly
or indirectly, to any person in Singapore other than (a) to an institutional investor or other person
falling within Section 274 of the Securities and Futures Act, (b) to a relevant person, or any person
pursuant to Section 275(1A) of the Securities and Futures Act, and in accordance with the conditions
specified in Section 275 of the Securities and Futures Act, or (c) otherwise than pursuant to, and in
accordance with the conditions of, any other applicable provision of the Securities and Futures Act.


                                                  190
Where the Notes are subscribed or purchased under Section 275 of the Securities and Futures Act by
a relevant person which is:

(a)   a corporation (which is not an accredited investor (as defined in Section 4A of the Securities and
      Futures Act)) the sole business of which is to hold investments and the entire share capital of
      which is owned by one or more individuals, each of whom is an accredited investor; or

(b)   a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments
      and each beneficiary is an accredited investor,

shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights
and interest in that trust shall not be transferable for six months after that corporation or that trust has
acquired the Notes under Section 275 of the Securities and Futures Act except:

to an institutional investor (for corporations, under Section 274 of the Securities and Futures Act) or
to a relevant person defined in Section 275(2) of the Securities and Futures Act, or to any other person
pursuant to an offer that is made on the terms that such shares, debentures and units of shares and
debentures and debentures of that corporation or such rights and interest in that trust are acquired at
a consideration of not less than S$200,000 (or is equivalent in a foreign currency) for each transaction,
whether such amount is to be paid for in cash or by exchange of securities or other assets, and further
for corporations in accordance with the conditions specified in Section 275 of the Securities and
Futures Act;

where no consideration is given for the transfer;


by operation of law; or

pursuant to Section 276(7) of the Securities and Futures Act.


Thailand

No invitation will be made to any person in Thailand to subscribe for the Notes. The Notes cannot be
offered, sold or transferred in Thailand.

PRC


According to relevant PRC laws and regulations, the Notes may not be offered or sold directly or
indirectly in the PRC to any person other than certain qualified domestic institutional investors, which
have acquired specify approval or permission to purchase overseas capital market products.General

Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will
be required to represent and agree, that it will (to the best of its knowledge and belief) comply with
all applicable securities laws and regulations in force in any jurisdiction in which it purchases, offers,
sells or delivers Notes or possesses or distributes this Offering Circular and will obtain any consent,
approval or permission required by it for the purchase, offer, sale or delivery by it of Notes under the
laws and regulations in force in any jurisdiction to which it is subject or in which it makes such
purchases, offers, sales or deliveries and neither the Bank nor any of the other Dealers shall have any
responsibility therefor.



                                                    191
None of the Bank and the Dealers represents that Notes may at any time lawfully be sold in compliance
with any applicable registration or other requirements in any jurisdiction, or pursuant to any
exemption available thereunder, or assumes any responsibility for facilitating such sale.

With regard to each Tranche, the relevant Dealer will be required to comply with such other
restrictions as the Bank and the relevant Dealer shall agree and as shall be set out in the applicable
Final Terms.




                                                 192
                                 GENERAL INFORMATION

Authorisation

The establishment of the Programme and the issue of Notes have been duly authorised by a approval
(No.gongyinshenpi No. 2291) dated 28 October 2010 from the Issuer to its Singapore branch regarding
the authorisation for establishment of the Programme.

Listing of Notes

Application will be made to the SGX-ST for permission to deal in, and the quotation of, any Notes
that may be issued pursuant to the Programme and that are agreed at or prior to the time of issue
thereof to be so listed on the SGX-ST. The SGX-ST assumes no responsibility for the correctness of
any of the statements made or opinions expressed or reports contained herein. The
approval-in-principle from, and the admission of any Notes to the Official List of, the SGX-ST is not
to be taken as an indication of the merits of the Bank, the Programme or the Notes. Unlisted Notes
may be issued under the Programme. The relevant Final Terms in respect of any Series will specify
whether or not such Notes will be listed and, if so, on which exchange(s) the Notes are to be listed.
There is no assurance that the application to the Official List of the SGX-ST for the listing of the
Notes of any Series will be approved. For so long as any Notes are listed on the SGX-ST and the rules
of the SGX-ST so require, the Notes will trade on the SGX-ST in a minimum board lot size of
S$200,000 so long as any of the Notes remain listed on the SGX-ST.

Documents Available

For the period of 12 months following the date of this Offering Circular, copies of the following
documents will, when published, be available for inspection at the Bank’s registered office and at the
specified offices of the Agent for the time being in Singapore and the PRC, respectively:

(a)   the Memorandum and Articles of Association of the Bank;

(b)   the Bank’s audited consolidated financial statements in respect of the financial years ended 31
      December 2007, 2008 and 2009;

(c)   the most recently published audited consolidated and non-consolidated annual financial
      statements of the Bank and the most recently published consolidated interim financial statements
      (if any) of the Bank, in each case together with any audit or review reports prepared in
      connection therewith (where relevant);

(d)   the Programme Agreement, the Agency Agreement, the Deed of Covenant and the forms of the
      Global Notes, the Notes in definitive form, the Receipts, the Coupons and the Talons;

(e)   a copy of this Offering Circular; and

(f)   any future offering circulars, prospectuses, information memoranda and supplements including
      Final Terms to this Offering Circular and any other documents incorporated herein or therein by
      reference.

The Bank currently prepares audited consolidated and non-consolidated accounts on an annual basis,
unaudited reviewed condensed consolidated interim accounts on a semi-annual basis and unaudited
un-reviewed consolidated interim accounts on a quarterly basis.


                                                 193
Clearing Systems

Each series of Bearer Notes will be initially represented by either a Temporary Global Note or a
Permanent Global Note that will be deposited on the issue date thereof with a common depositary on
behalf of Euroclear and Clearstream, Luxembourg or any other agreed clearance system compatible
with Euroclear and Clearstream, Luxembourg. Each series of Registered Notes will be initially
represented by interests in a Global Registered Note and deposited on the issue date thereof with a
common depositary for, and registered in the name of a nominee of, Euroclear and Clearstream,
Luxembourg. The appropriate Common Code and the ISIN for each series of Bearer Notes or
Registered Notes allocated by Euroclear and Clearstream, Luxembourg will be specified in the
applicable Final Terms. If the Notes are to clear through an additional or alternative clearing system,
the appropriate information will be specified in the applicable Final Terms.


The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1210 Brussels.
The address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855
Luxembourg.

Conditions for Determining Price


The price and amount of Notes to be issued under the Programme will be determined by the Bank and
the relevant Dealer at the time of issue in accordance with prevailing market conditions.


Significant or Material Change

Save as disclosed in this Offering Circular, there has been no significant change in the financial or
trading position of the Group since 31 December 2009 and there has been no material adverse change
in the financial position or prospects of the Group since 31 December 2009.

Litigation


Other than as disclosed in the Offering Circular, neither the Bank nor any other member of the Group
is or has been involved in any governmental, legal or arbitration proceedings (including any such
proceedings which are pending or threatened of which the Bank is aware) in the 12 months preceding
the date of this document which may have or have in such period had a significant effect on the
financial position or profitability of the Bank or the Group.


Auditors

The Bank’s consolidated financial statements as of and for the years ended 31 December 2007, 2008
and 2009, prepared in accordance with IFRS and included in this Offering Circular, have been audited
by Ernst & Young, independent accountants, in accordance with international auditing standards,
respectively, as stated in their reports appearing herein.


Dealers Transacting with the Bank

Certain of the Dealers and their affiliates have engaged, and may in the future engage, in investment
banking and/or commercial banking transactions with, and may perform services for, the Bank and its
affiliates in the ordinary course of business.



                                                 194
INDEX TO THE FINANCIAL STATEMENTS




               F-1
Industrial and Commercial Bank of China Limited
Consolidated Income Statement — Prepared in accordance with IFRSs
For the nine months ended 30 September 2010
(In RMB millions, unless otherwise stated)

                                                   Three months        Nine months     Three months      Nine months
                                                          ended              ended            ended            ended
                                                   30 September       30 September     30 September     30 September
                                                           2010               2010             2009             2009
                                                      (unaudited)        (unaudited)      (unaudited)      (unaudited)

Interest income                                          118,953            338,818         101,542          300,819
Interest expense                                         (40,602)          (117,155)        (39,331)        (122,570)


NET INTEREST INCOME                                       78,351           221,663           62,211          178,249


Fee and commission income                                 18,974             58,029          14,351           43,642
Fee and commission expense                                (1,300)            (3,466)         (1,034)          (2,581)


NET FEE AND COMMISSION INCOME                             17,674             54,563          13,317           41,061


Net trading income/(expense)                                  (244)            (566)           (327)             161
Net loss on financial assets and liabilities
  designated at fair value through profit or loss               (19)            (143)             (9)            (126)
Net gain on financial investments                                31              120           3,158            6,507
Other operating income/(expense), net                          964            2,048            (305)             275


OPERATING INCOME                                          96,757           277,685           78,045          226,127

Operating expenses                                       (33,549)           (95,418)        (30,699)         (83,747)

Impairment losses on:
  Loans and advances to customers                         (8,243)           (17,986)          (4,405)        (13,653)
  Others                                                     116                166             (166)         (1,130)


OPERATING PROFIT                                          55,081           164,447           42,775          127,597
Share of profits and losses of associates and
  jointly-controlled entities                                  627            1,877             421            1,387


PROFIT BEFORE TAX                                         55,708           166,324           43,196          128,984
Income tax expense                                       (12,878)          (38,529)          (9,376)         (28,440)


PROFIT FOR THE PERIOD                                     42,830           127,795           33,820          100,544




                                                         11


                                                         F-2
Industrial and Commercial Bank of China Limited
Consolidated Income Statement — Prepared in accordance with IFRSs
(continued)
For the nine months ended 30 September 2010
(In RMB millions, unless otherwise stated)

                                         Three months        Nine months     Three months      Nine months
                                                ended              ended            ended            ended
                                         30 September       30 September     30 September     30 September
                                                 2010               2010             2009             2009
                                            (unaudited)        (unaudited)      (unaudited)      (unaudited)

Attributable to:
  Equity holders of the parent company          42,613           127,216           33,595          100,019
  Non-controlling interests                        217               579              225              525


                                                42,830           127,795           33,820          100,544


EARNINGS PER SHARE ATTRIBUTABLE
 TO ORDINARY EQUITY HOLDERS OF
 THE PARENT COMPANY
 — Basic (in RMB Yuan)                               0.13            0.38             0.10             0.30
 — Diluted (in RMB Yuan)                             0.13            0.38             0.10             0.30




                                               12


                                               F-3
Industrial and Commercial Bank of China Limited
Consolidated Statement of Comprehensive Income — Prepared in
accordance with IFRSs
For the nine months ended 30 September 2010
(In RMB millions, unless otherwise stated)

                                                      Three months      Nine months     Three months      Nine months
                                                             ended            ended            ended            ended
                                                      30 September     30 September     30 September     30 September
                                                              2010             2010             2009             2009
                                                         (unaudited)      (unaudited)      (unaudited)      (unaudited)

Profit for the period                                         42,830         127,795           33,820          100,544

Other comprehensive income/(loss) (after-tax, net):

  Net gain/(loss) on available-for-sale financial
    assets                                                    1,325            5,816           (5,500)          (7,743)
  Net loss on cash flow hedges                                   (59)            (129)              (1)              (2)
  Share of other comprehensive income of
    associates and jointly-controlled entities                 (433)            (527)            (54)           (1,115)
  Foreign currency translation differences                    3,144            1,387           1,811             7,354


Subtotal of other comprehensive income/(loss)
  for the period                                              3,977            6,547           (3,744)          (1,506)

Total comprehensive income for the period                    46,807         134,342           30,076           99,038


Total comprehensive income attributable to:
  Equity holders of the parent company                       46,568         133,756           29,684           98,062
  Non-controlling interests                                     239             586              392              976


                                                             46,807         134,342           30,076           99,038




                                                            13


                                                            F-4
Industrial and Commercial Bank of China Limited
Consolidated Statement of Financial Position — Prepared in accordance
with IFRSs
As at 30 September 2010
(In RMB millions, unless otherwise stated)

                                                                  30 September     31 December
                                                                          2010            2009
                                                                     (unaudited)       (audited)

ASSETS
Cash and balances with central banks                                  2,266,208       1,693,048
Due from banks and other financial institutions                          304,421         235,301
Financial assets held for trading                                        16,205          18,976
Financial assets designated at fair value through profit or loss             968           1,171
Derivative financial assets                                               10,254           5,758
Reverse repurchase agreements                                           366,015         408,826
Loans and advances to customers                                       6,412,354       5,583,174
Financial investments                                                 3,733,465       3,579,026
Investments in associates and jointly-controlled entities                38,880          36,278
Property and equipment                                                   94,734          95,684
Deferred income tax assets                                               17,535          18,696
Other assets                                                            156,848         109,115

TOTAL ASSETS                                                         13,417,887     11,785,053




                                                  14


                                                 F-5
Industrial and Commercial Bank of China Limited
Consolidated Statement of Financial Position — Prepared in accordance
with IFRSs (continued)
As at 30 September 2010
(In RMB millions, unless otherwise stated)

                                                               30 September     31 December
                                                                       2010            2009
                                                                  (unaudited)       (audited)

LIABILITIES
Financial liabilities designated at fair value through profit
  or loss                                                              8,340          15,831
Derivative financial liabilities                                       10,416           7,773
Due to banks and other financial institutions                       1,009,438       1,001,634
Repurchase agreements                                                  2,999          36,060
Certificates of deposit and notes payable                               8,406           1,472
Due to customers                                                  11,282,590       9,771,277
Income tax payable                                                    26,602          22,231
Deferred income tax liabilities                                          218             178
Bond payable                                                          96,949          75,000
Other liabilities                                                    212,424         174,663

TOTAL LIABILITIES                                                 12,658,382     11,106,119

EQUITY
Equity attributable to equity holders of the parent company
  Issued share capital                                              334,019         334,019
  Reserves                                                          230,732         221,114
  Retained profits                                                   189,081         118,760

                                                                    753,832         673,893
Non-controlling interests                                             5,673           5,041

TOTAL EQUITY                                                        759,505         678,934

TOTAL EQUITY AND LIABILITIES                                      13,417,887     11,785,053




                                                  15


                                                  F-6
Industrial and Commercial Bank of China Limited
Consolidated Statement of Cash Flows — Prepared in accordance with
IFRSs
For the nine months ended 30 September 2010
(In RMB millions, unless otherwise stated)

                                                                 Nine months      Nine months
                                                                       ended            ended
                                                                30 September     30 September
                                                                        2010             2009
                                                                   (unaudited)      (unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax                                                     166,324          128,984
Adjustments for:
  Share of profits and losses of associates and
     jointly-controlled entities                                       (1,877)         (1,387)
  Depreciation                                                          8,061           7,136
  Amortisation                                                            950           2,237
  Amortisation of financial investments                                 (5,813)         (1,316)
  Impairment losses on loans and advances to customers                 17,986          13,653
  Impairment losses on assets other than loans and advances
     to customers                                                        (166)           1,130
  Unrealised foreign exchange difference                                2,238            4,357
  Interest expense on bonds                                             1,938            1,136
  Accreted interest on impaired loans                                    (641)            (984)
  Gain on disposal of available-for-sale financial assets, net             (76)          (6,454)
  Net trading gain on equity investments                                   (9)             (24)
  Net gain on disposal of property and equipment and
     other assets (other than repossessed assets)                        (165)           (220)
  Dividend income                                                         (44)            (54)

                                                                     188,706          148,194

Net decrease/(increase) in operating assets:
  Due from central banks                                             (399,743)       (209,559)
  Due from banks and other financial institutions                       18,911          27,619
  Financial assets held for trading                                     2,911           8,066
  Financial assets designated at fair value through
     profit or loss                                                        232             397
  Reverse repurchase agreements                                       219,847        (411,501)
  Loans and advances to customers                                    (855,646)     (1,020,083)
  Other assets                                                        (43,305)         19,808

                                                                   (1,056,793)     (1,585,253)


                                                 16


                                                F-7
Industrial and Commercial Bank of China Limited
Consolidated Statement of Cash Flows — Prepared in accordance with
IFRSs (continued)
For the nine months ended 30 September 2010
(In RMB millions, unless otherwise stated)

                                                             Nine months      Nine months
                                                                   ended            ended
                                                            30 September     30 September
                                                                    2010             2009
                                                               (unaudited)      (unaudited)

Net increase/(decrease) in operating liabilities:
  Financial liabilities designated at fair value through
     profit or loss                                                 (7,491)          4,935
  Due to banks and other financial institutions                      9,478         317,957
  Repurchase agreements                                           (33,061)          1,398
  Certificates of deposit and notes payable                         (6,934)            712
  Due to customers                                              1,517,188       1,527,671
  Other liabilities                                                51,642         (12,955)

                                                                1,530,822       1,839,718

Net cash inflow from operating activities before tax              662,735          402,659
Income tax paid                                                  (34,879)         (60,463)

Net cash inflow from operating activities                         627,856          342,196

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment and other assets               (7,759)          (6,665)
Proceeds from disposal of property and equipment and
  other assets (other than repossessed assets)                        635             456
Purchases of financial investments                              (1,746,518)     (1,080,943)
Proceeds from sale and redemption of financial investments       1,604,874         740,187
Investments in associates and jointly-controlled entities            (823)             (5)
Dividends received                                                    999             465
Disposal of a subsidiary                                             (528)             —
Acquisition of subsidiaries                                        (2,929)             —

Net cash outflow from investing activities                        (152,049)       (346,505)




                                                  17


                                                  F-8
Industrial and Commercial Bank of China Limited
Consolidated Statement of Cash Flows — Prepared in accordance with
IFRSs (continued)
For the nine months ended 30 September 2010
(In RMB millions, unless otherwise stated)

                                                                Nine months      Nine months
                                                                      ended            ended
                                                               30 September     30 September
                                                                       2010             2009
                                                                  (unaudited)      (unaudited)

CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution from non-controlling shareholders                   230              —
Proceeds from issuance of convertible bonds                           25,000              —
Proceeds from issuance of subordinated bonds                          22,000          40,000
Interest paid on bonds                                                (2,597)         (1,168)
Repayment of debts issued                                            (22,000)             —
Cash paid for other financing activities                                 (128)             —
Dividends paid on ordinary shares                                    (56,783)        (55,113)
Dividends paid to non-controlling shareholders                          (196)            (38)

Net cash outflow from financing activities                             (34,474)        (16,319)

NET INCREASE/(DECREASE) IN CASH AND
  CASH EQUIVALENTS                                                  441,333          (20,628)
Cash and cash equivalents at beginning of the period                409,394          607,291
Effect of exchange rate changes on cash and cash equivalents         (2,850)            (294)

CASH AND CASH EQUIVALENTS AT END OF
 THE PERIOD                                                         847,877          586,369

NET CASH INFLOW/(OUTFLOW) FROM OPERATING
   ACTIVITIES INCLUDES:
Interest received                                                    327,353         294,517
Interest paid                                                       (106,394)       (122,545)




                                                18


                                               F-9
INDEPENDENT AUDITORS’ REPORT

To the shareholders of Industrial and Commercial Bank of China Limited
(Incorporated in the People’s Republic of China with limited liability)


We have audited the financial statements of Industrial and Commercial Bank of China Limited (the
“Bank”) and its subsidiaries (collectively referred to as the “Group”) set out on pages F-12 to F-140,
which comprise the consolidated and company statements of financial position as at 31 December
2009, and the consolidated income statement, consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for the year then
ended, and a summary of significant accounting policies and other explanatory notes.


Directors’ responsibility for the financial statements

The directors of the Bank are responsible for the preparation and fair presentation of these financial
statements in accordance with International Financial Reporting Standards promulgated by the
International Accounting Standards Board and the disclosure requirements of the Hong Kong
Companies Ordinance. This responsibility includes designing, implementing and maintaining internal
control relevant to the preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in the circumstances.


Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Our report
is made solely to you, as a body, and for no other purpose. We do not assume responsibility towards
or accept liability to any other person for the contents of this report.

We conducted our audit in accordance with International Standards on Auditing. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance as to whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditors’ judgement, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditors consider internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial statements.


We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.




                                                 F-10
Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Bank
and of the Group as at 31 December 2009, and of the Group’s financial performance and its cash flows
for the year then ended in accordance with International Financial Reporting Standards and have been
properly prepared in accordance with the disclosure requirements of the Hong Kong Companies
Ordinance.

Certified Public Accountants
Hong Kong
25 March 2010




                                                 F-11
INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED
CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 DECEMBER 2009
(In RMB millions, unless otherwise stated)

                                                                                 Notes   2009            2008


Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     6        405,878         440,574
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    6       (160,057)       (177,537)


NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . .                 6        245,821         263,037
Fee and commission income. . . . . . . . . . . . . . . . . . . . . .              7         59,042          46,711
Fee and commission expense . . . . . . . . . . . . . . . . . . . . .              7         (3,895)         (2,709)
NET FEE AND COMMISSION INCOME. . . . . . . . . . . .                              7         55,147          44,002
Net trading income/(expense) . . . . . . . . . .           .........       ..     8               (75)          1,883
Net loss on financial assets and liabilities               designated
  at fair value through profit or loss . . . .             .........       ..      9             (129)           (699)
Net gain/(loss) on financial investments . .               .........       ..     10            7,339            (367)
Other operating income, net . . . . . . . . . . .          .........       ..     11            1,308           2,339
OPERATING INCOME .                 ........................                                309,411         310,195
Operating expenses . . . .         ........................                       12      (120,819)       (111,335)
Impairment losses on:
  Loans and advances to            customers . . . . . . . . . . . . . . . .      26       (21,682)        (36,512)
  Others . . . . . . . . . . . .   ........................                       15        (1,603)        (18,950)
OPERATING PROFIT . . . . . . . . . . . . . . . . . . . . . . . . . .                       165,307         143,398
Share of profits and losses of associates and a
  jointly-controlled entity . . . . . . . . . . . . . . . . . . . . . . .                       1,987           1,978
PROFIT BEFORE TAX . . . . . . . . . . . . . . . . . . . . . . . . .                        167,294         145,376
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .        16       (37,898)        (34,150)
PROFIT FOR THE YEAR . . . . . . . . . . . . . . . . . . . . . . .                          129,396         111,226
Attributable to:
  Equity holders of the parent company . . . . . . . . . . . . .                           128,645         110,841
  Non-controlling interests . . . . . . . . . . . . . . . . . . . . . .                        751             385
                                                                                           129,396         111,226
EARNINGS PER SHARE ATTRIBUTABLE TO
 EQUITY HOLDERS OF THE PARENT COMPANY
 - Basic and diluted (RMB yuan) . . . . . . . . . . . . . . . . .                 19             0.39            0.33


Details of the dividends declared and paid or proposed are disclosed in note 18 to the financial
statements.




                                                                 F-12
INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 DECEMBER 2009
(In RMB millions, unless otherwise stated)

                                                                                  Note   2009         2008


Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .            129,396      111,226
Other comprehensive income/(loss) (after-tax, net):
  Net gain/(loss) on available-for-sale financial assets .                    .   41        (8,890)       9,191
  Net loss on cash flow hedges . . . . . . . . . . . . . . . . . .            .   41            (9)      (4,073)
  Share of other comprehensive income/(loss) of
    associates and a jointly-controlled entity . . . . . . . .                .   41        (1,155)         500
  Foreign currency translation differences . . . . . . . . . .                .   41         7,531       (8,604)
Subtotal of other comprehensive loss for the year . . . . .                                 (2,523)      (2,986)
Total comprehensive income for the year . . . . . . . . . . . .                            126,873      108,240
Total comprehensive income attributable to:
  Equity holders of the parent company . . . . . . . . . . . . .                           125,682      108,729
  Non-controlling interests . . . . . . . . . . . . . . . . . . . . . .                      1,191         (489)
                                                                                           126,873      108,240




                                                                F-13
INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 DECEMBER 2009
(In RMB millions, unless otherwise stated)

                                                                                               Notes   2009           2008


ASSETS
Cash and balances with central banks . . . . . . . . .                     .....                20      1,693,048      1,693,024
Due from banks and other financial institutions . .                        .....                21        235,301        168,363
Financial assets held for trading . . . . . . . . . . . . .                .....                22         18,976         32,182
Financial assets designated at fair value through
  profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . .       .   .   .   .   .    23          1,171          1,459
Derivative financial assets . . . . . . . . . . . . . . . . . .            .   .   .   .   .    24          5,758         15,721
Reverse repurchase agreements . . . . . . . . . . . . . .                  .   .   .   .   .    25        408,826        163,493
Loans and advances to customers . . . . . . . . . . . . .                  .   .   .   .   .    26      5,583,174      4,436,011
Financial investments . . . . . . . . . . . . . . . . . . . . . .          .   .   .   .   .    27      3,579,026      3,014,669
Investments in associates and a jointly-controlled
  entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .    29        36,278         28,421
Property and equipment . . . . . . . . . . . . . . . . . . . .             .   .   .   .   .    30        95,684         86,800
Deferred income tax assets. . . . . . . . . . . . . . . . . .              .   .   .   .   .    31        18,696         10,746
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .    32       109,115        106,257
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               11,785,053      9,757,146
LIABILITIES
Financial liabilities held for trading . . . . . . . . . . . . .                   ...                        —              4,268
Financial liabilities designated at fair value through
  profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .           .   .   .    33         15,831          7,566
Derivative financial liabilities . . . . . . . . . . . . . . . . .                 .   .   .    24          7,773         13,612
Due to banks and other financial institutions . . . . . .                          .   .   .    34      1,001,634        646,254
Repurchase agreements . . . . . . . . . . . . . . . . . . . . . .                  .   .   .    35         36,060          4,648
Certificates of deposit and notes payable . . . . . . . . .                        .   .   .                1,472            726
Due to customers . . . . . . . . . . . . . . . . . . . . . . . . . . .             .   .   .    36      9,771,277      8,223,446
Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . .               .   .   .               22,231         37,862
Deferred income tax liabilities . . . . . . . . . . . . . . . . .                  .   .   .    31            178             16
Subordinated bonds . . . . . . . . . . . . . . . . . . . . . . . . .               .   .   .    37         75,000         35,000
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .          .   .   .    38        174,663        177,118
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . .                                  11,106,119      9,150,516
EQUITY
Equity attributable to equity holders of                 the parent
  company
  Issued share capital . . . . . . . . . . . . .         .............                          39       334,019        334,019
  Reserves . . . . . . . . . . . . . . . . . . . . . .   .............                          40       221,114        195,727
  Retained profits . . . . . . . . . . . . . . . .       .............                          40       118,760         72,929
                                                                                                         673,893        602,675
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . .                                  5,041          3,955
TOTAL EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 678,934        606,630
TOTAL EQUITY AND LIABILITIES . . . . . . . . . . . . . . .                                             11,785,053      9,757,146




Chairman                                              Vice Chairman                                       General Manager of
                                                      and President                                       Finance and Accounting
                                                                                                          Department




                                                                    F-14
       INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED
       CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
       YEAR ENDED 31 DECEMBER 2009
       (In RMB millions, unless otherwise stated)

                                                                                           Attributable to equity holders of the parent company

                                                                                                           Reserves

                                                                                                                 Foreign
                                                          Issued                                   Investment currency Cash flow                                                                 Non-
                                                           share     Capital    Surplus    General revaluation translation  hedge          Other                    Retained                  controlling    Total
                                                          capital    reserve    reserves   reserve   reserve     reserve   reserve        reserves     Subtotal      profits     Total         interests    equity

       Balance as at 1 January 2009 . . . . . . .          334,019    106,312     24,650     69,355       8,433       (9,448)   (4,075)        500      195,727        72,929    602,675           3,955    606,630
       Profit for the year . . . . . . . . . . . . . .          —          —           —         —          —            —         —             —            —       128,645    128,645             751    129,396
       Other comprehensive income/(loss) . . .                  —          —           —         —       (9,330)      7,529         (7)      (1,155)      (2,963)          —      (2,963)            440      (2,523)

       Total comprehensive income/(loss) . . . .                —          —           —         —       (9,330)      7,529         (7)      (1,155)      (2,963)     128,645    125,682           1,191    126,873
       Dividend - 2008 final (note 18). . . . . .               —          —           —         —          —            —         —             —            —       (55,113)   (55,113)             —      (55,113)
       Appropriation to surplus reserves (i). . .               —          —      12,834         —          —            —         —             —        12,834      (12,834)           —            —              —




F-15
       Appropriation to general reserve (ii) . . .              —          —           —     14,867         —            —         —             —        14,867      (14,867)           —            —              —
       Change in shareholdings in subsidiaries .                —          99          —         —          —            —         —             —           99            —             99          (99)            —
       Capital injection by non-controlling
          shareholders . . . . . . . . . . . . . . . .          —          —           —         —          —            —         —             —            —            —             —            80             80
       Dividends to non-controlling
         shareholders . . . . . . . . . . . . . . . .           —          —           —         —          —            —         —             —            —            —             —           (86)        (86)
       Others . . . . . . . . . . . . . . . . . . . . .         —         550          —         —          —            —         —             —          550            —         550              —         550

       Balance as at 31 December 2009 . . . . .            334,019    106,961     37,484     84,222       (897)       (1,919)   (4,082)        (655)    221,114       118,760    673,893           5,041    678,934



       (i)    Includes the appropriation made by overseas branches and subsidiaries in the amount of RMB29 million and RMB30 million, respectively.

       (ii)   Includes the appropriation made by subsidiaries in the amount of RMB54 million.
                                                                                           Attributable to equity holders of the parent company

                                                                                                           Reserves

                                                                                                                 Foreign
                                                         Issued                                    Investment currency Cash flow                                                              Non-
                                                          share     Capital    Surplus     General revaluation translation  hedge          Other                  Retained                 controlling    Total
                                                         capital    reserve    reserves    reserve   reserve     reserve   reserve        reserves   Subtotal      profits     Total        interests    equity

       Balance as at 1 January 2008 . . . . . . .         334,019    106,312     13,536      40,834      (1,389)      (1,089)      —             —    158,204        46,148    538,371          5,305    543,676
       Profit for the year . . . . . . . . . . . . . .         —          —           —          —          —            —         —             —          —       110,841    110,841            385     111,226
       Other comprehensive income/(loss) . . .                 —          —           —          —        9,822       (8,359)   (4,075)        500      (2,112)          —      (2,112)          (874)     (2,986)

       Total comprehensive income/(loss) . . . .               —          —           —          —        9,822       (8,359)   (4,075)        500      (2,112)     110,841    108,729           (489)   108,240
       Dividend - 2007 final (note 18) . . . . .               —          —           —          —          —            —         —             —          —       (44,425)   (44,425)            —      (44,425)
       Appropriation to surplus reserves (i). . .              —          —       11,114         —          —            —         —             —      11,114      (11,114)           —           —              —
       Appropriation to general reserve (ii) . . .             —          —           —      28,521         —            —         —             —      28,521      (28,521)           —           —              —
       Acquisition of a subsidiary . . . . . . . .             —          —           —          —          —            —         —             —          —            —             —          368        368
       Change in shareholdings in a subsidiary                 —          —           —          —          —            —         —             —          —            —             —         (854)       (854)
       Dividends to non-controlling
         shareholders . . . . . . . . . . . . . . . .          —          —           —          —          —            —         —             —          —            —             —         (375)       (375)




F-16
       Balance as at 31 December 2008          . . . .    334,019    106,312     24,650      69,355       8,433       (9,448)   (4,075)        500    195,727        72,929    602,675          3,955    606,630



       (i)    Includes the appropriation made by overseas branches and subsidiaries in the amount of RMB9 million and RMB53 million, respectively.


       (ii)   Includes the appropriation made by subsidiaries in the amount of RMB147 million.
INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED 31 DECEMBER 2009
(In RMB millions, unless otherwise stated)

                                                                                         Notes   2009           2008
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      167,294        145,376
Adjustments for:
  Share of profits and losses of associates and a
    jointly-controlled entity . . . . . . . . . . . . . . . . . . . . . .                            (1,987)       (1,978)
  Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              12          9,639         8,190
  Amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            12          1,361         1,300
  Amortisation of financial investments . . . . . . . . . . . . .                                    (3,566)       (4,345)
  Impairment losses on loans and advances to
    customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             26        21,682         36,512
  Impairment losses on assets other than loans and
    advances to customers . . . . . . . . . . . . . . . . . . . . . . .                   15          1,603        18,950
  Unrealised foreign exchange difference. . . . . . . . . . . .                                       4,297        30,390
  Interest expense on subordinated bonds . . . . . . . . . . .                            6           1,790         1,241
  Accreted interest on impaired loans . . . . . . . . . . . . . .                         6          (1,021)       (1,538)
  (Gain)/loss on disposal of available-for-sale financial
    assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           10         (7,238)           449
  Net trading (gain)/loss on equity investments . . . . . . .                             8             (26)            14
  Net loss on financial assets and liabilities designated
    at fair value through profit or loss . . . . . . . . . . . . .                                      129             57
  Net gain on disposal of property and equipment and
    other assets (other than repossessed assets) . . . . . . .                                          (575)          (518)
  Dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 10            (101)           (82)
                                                                                                   193,281        234,018
Net decrease/(increase) in operating assets:
 Due from central banks . . . . . . . . . . . . . . . . . . .            ....                     (284,127)      (262,312)
 Due from banks and other financial institutions .                       ....                      (72,561)        13,801
 Financial assets held for trading . . . . . . . . . . . . .             ....                       13,005          6,580
 Financial assets designated at fair value through
    profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .                  396         1,182
 Reverse repurchase agreements . . . . . . . . . . . . . .               .   .   .   .             (153,500)      (56,115)
 Loans and advances to customers . . . . . . . . . . . .                 .   .   .   .           (1,169,891)     (541,025)
 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .   .   .   .               (1,826)       (7,133)
                                                                                                 (1,668,504)     (845,022)
Net increase/(decrease) in operating liabilities:
 Financial liabilities designated at fair value through
    profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         .               4,065         (6,759)
 Due to banks and other financial institutions . . . . . .                           .             355,470       (148,259)
 Repurchase agreements . . . . . . . . . . . . . . . . . . . . . . .                 .              31,412       (188,835)
 Certificates of deposit . . . . . . . . . . . . . . . . . . . . . . .               .                (747)          (252)
 Due to customers . . . . . . . . . . . . . . . . . . . . . . . . . . .              .           1,548,192      1,337,886
 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .           .                (369)        26,681
                                                                                                 1,938,023      1,020,462
Net cash inflow from operating activities before tax . . .                                         462,800        409,458
Income tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      (58,938)       (38,545)
Net cash inflow from operating activities . . . . . . . . . . . .                                  403,862        370,913




                                                                  F-17
                                                                                         Notes   2009           2008
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment and other assets                                 .             (20,285)       (15,554)
Proceeds from disposal of property and equipment and
  other assets (other than repossessed assets). . . . . . . .                        .                1,407            520
Purchases of financial investments . . . . . . . . . . . . . . . .                   .           (1,559,376)    (1,086,048)
Proceeds from sale and redemption of investments . . .                               .              992,406      1,127,448
Invest in a jointly-controlled entity . . . . . . . . . . . . . . .                  .                   (5)            —
Acquisition of a subsidiary . . . . . . . . . . . . . . . . . . . . .                .                   —           2,261
Acquisition of non-controlling interests . . . . . . . . . . . .                     .                   —          (1,783)
Acquisition of an associate . . . . . . . . . . . . . . . . . . . . .                .                   —         (37,420)
Proceeds from disposal of an associate . . . . . . . . . . . .                       .                   25             —
Dividends received. . . . . . . . . . . . . . . . . . . . . . . . . . . .            .                  544            652
Net cash outflow from investing activities . . . . . . . . . . .                                  (585,284)         (9,924)

CASH FLOWS FROM FINANCING ACTIVITIES
Capital injection by non-controlling shareholders . .                    .   .   .   .                   80            66
Proceeds from debts issued . . . . . . . . . . . . . . . . . .           .   .   .   .               40,000            —
Interest paid on subordinated bonds . . . . . . . . . . . .              .   .   .   .               (1,168)       (1,240)
Dividends paid on ordinary shares . . . . . . . . . . . . .              .   .   .   .              (55,113)      (44,425)
Dividends paid to non-controlling shareholders . . .                     .   .   .   .                  (86)         (325)
Net cash outflow from financing activities . . . . . . . . . . .                                   (16,287)       (45,924)
NET INCREASE/(DECREASE) IN CASH AND
  CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . .                                (197,709)       315,065
Cash and cash equivalents at beginning of the year . . . .                                         607,291        301,687
Effect of exchange rate changes on cash and cash
  equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         (188)       (9,461)
CASH AND CASH EQUIVALENTS AT END OF THE
 YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            42       409,394        607,291
NET CASH INFLOW/(OUTFLOW) FROM
  OPERATING ACTIVITIES INCLUDES:
Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      399,115        425,143
Interest paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  (162,920)      (148,789)




                                                                   F-18
INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED
STATEMENT OF FINANCIAL POSITION
YEAR ENDED 31 DECEMBER 2009
(In RMB millions, unless otherwise stated)

                                                                                        Notes   2009           2008
ASSETS
Cash and balances with central banks . . . . . . . .                    .....       .    20      1,686,074      1,691,466
Due from banks and other financial institutions .                       .....       .    21        238,562        154,357
Financial assets held for trading . . . . . . . . . . . .               .....       .    22         14,241         25,362
Financial assets designated at fair value through                       profit
  or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .....       .    23            148            144
Derivative financial assets . . . . . . . . . . . . . . . . .           .....       .    24          4,781         13,991
Reverse repurchase agreements . . . . . . . . . . . . .                 .....       .    25        408,601        162,192
Loans and advances to customers . . . . . . . . . . . .                 .....       .    26      5,392,525      4,289,955
Financial investments . . . . . . . . . . . . . . . . . . . . .         .....       .    27      3,551,558      3,002,451
Investments in subsidiaries. . . . . . . . . . . . . . . . .            .....       .    28         26,110         19,999
Investments in associates . . . . . . . . . . . . . . . . . .           .....       .    29         33,576         33,160
Property and equipment . . . . . . . . . . . . . . . . . . .            .....       .    30         93,678         86,220
Deferred income tax assets. . . . . . . . . . . . . . . . .             .....       .    31         18,635         10,607
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .....       .    32         96,663         96,261
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        11,565,152      9,586,165
LIABILITIES
Financial liabilities held for trading . . . . . . . . . . . . .            ...                        —              4,268
Financial liabilities designated at fair value through
  profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .   .   .    33         14,581          2,285
Derivative financial liabilities . . . . . . . . . . . . . . . . .          .   .   .    24          6,689         11,003
Due to banks and other financial institutions . . . . . .                   .   .   .    34        981,762        632,760
Repurchase agreements . . . . . . . . . . . . . . . . . . . . . .           .   .   .    35         34,280          4,246
Certificates of deposit and notes payable . . . . . . . . .                 .   .   .                1,156             —
Due to customers . . . . . . . . . . . . . . . . . . . . . . . . . . .      .   .   .    36      9,590,769      8,077,732
Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . .        .   .   .               20,686         37,894
Subordinated bonds . . . . . . . . . . . . . . . . . . . . . . . . .        .   .   .    37         75,000         35,000
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .    38        171,131        173,494
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . .                           10,896,054      8,978,682
EQUITY
Issued share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .             39       334,019        334,019
Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         40       220,938        203,231
Retained profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           40       114,141         70,233
TOTAL EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          669,098        607,483
TOTAL EQUITY AND LIABILITIES . . . . . . . . . . . . . . .                                      11,565,152      9,586,165




Chairman                                             Vice Chairman                                 General Manager of
                                                     and President                                 Finance and Accounting
                                                                                                   Department




                                                                   F-19
INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED
NOTES TO FINANCIAL STATEMENTS
31 DECEMBER 2009
(In RMB millions, unless otherwise stated)

1.     CORPORATE INFORMATION


Industrial and Commercial Bank of China Limited (the “Bank”), which was previously known as Industrial and Commercial
Bank of China (“ICBC”), used to be a wholly-state-owned commercial bank established on 1 January 1984 based on the
authorisation of the State Council and the People’s Bank of China (the “PBOC”) of the People’s Republic of China (the “PRC”).
On 28 October 2005, with the approval of the State Council, ICBC was restructured and incorporated as a joint-stock limited
company. The joint-stock limited company undertook all the assets and liabilities of ICBC upon the restructuring.


The Bank obtained its finance permit No. B0001H111000001 from the China Banking Regulatory Commission (the “CBRC”)
of the PRC. The Bank obtained its business license No. 100000000003965 from the State Administration for Industry and
Commerce of the PRC. The legal representative is Jiang Jianqing and the registered office is located at No. 55 Fuxingmennei
Avenue, Xicheng District, Beijing, the PRC.


The Bank’s A Shares and H Shares are listed on the Shanghai Stock Exchange and the Stock Exchange of Hong Kong Limited
and the stock codes are 601398 and 1398 respectively.


The principal activities of the Bank and its subsidiaries (collectively referred to as the “Group”) comprise corporate and
personal banking, treasury operations, investment banking, asset management, trust, financial leasing and other financial
services. Domestic establishments refer to the Head Office of the Bank, branches and subsidiaries established inside Mainland
China. Overseas establishments refer to branches and subsidiaries established under local jurisdictions outside Mainland China.


2.1    BASIS OF PREPARATION AND ACCOUNTING POLICIES


Statement of compliance


These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) and
interpretations promulgated by the International Accounting Standards Board (“IASB”) and the disclosure requirements of the
Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for derivative financial
instruments, financial assets and liabilities held for trading, financial assets and liabilities designated at fair value through profit
or loss and available-for-sale financial assets that have been measured at fair value, as further explained in the respective
accounting policies below. The carrying values of recognised assets and liabilities, that are hedged in fair value hedges and are
otherwise carried at cost, are adjusted to record changes in the fair values attributable to the risks that are being hedged. These
financial statements are presented in RMB and all values are rounded to the nearest million except when otherwise indicated.


Basis of consolidation


The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries. The financial
statements of subsidiaries, for the purpose of preparation of these consolidated financial statements, are prepared for the same
reporting period as the Bank, using consistent accounting policies.


(i)    Subsidiaries


Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue
to be consolidated until the date that such control ceases. Control is achieved where the Bank has the power to govern the
financial and operating policies of an entity so as to obtain benefits from its activities. Where there is a loss of control in a
subsidiary, the consolidated income statement includes the results of that subsidiary for the part of the reporting period during
which the Bank has control. All intra-group balances, transactions, income and expenses and profits and losses resulting from
intra-group transactions are eliminated in full.


A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction.



                                                                F-20
Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are
presented separately in the consolidated income statement, and within equity in the consolidated statement of financial position
separately from the equity attributable to equity holders of the parent company. An acquisition of non-controlling interests is
accounted for as an equity transaction.


(ii)   Special purpose entities


Special purpose entities (“SPEs”) are consolidated if they are in substance controlled by the Bank. When assessing whether the
Bank has a control over the SPEs, the Bank evaluates a range of factors, including whether:


(a)    the activities of the SPE are being conducted on behalf of the Bank and according to the Bank’s specific business needs
       so that the Bank obtains benefits from the SPE’s operations;


(b)    the Bank has the decision-making powers to obtain the majority of the benefits of the activities of the SPE;


(c)    the Bank has rights to obtain the majority of the benefits of the SPE and therefore may be exposed to risks incident to
       the activities of the SPE; or


(d)    the Bank retains the majority of the residual or ownership risks related to the SPE or its assets in order to obtain benefits
       from its activities.


2.2    NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS THAT ARE EFFECTIVE
       OR EARLY ADOPTED IN 2009 AND RELEVANT TO THE GROUP


The IASB has issued the following new and revised IFRSs (including International Accounting Standards (“IASs”)) and IFRIC
interpretations that are effective or early adopted in 2009 and relevant to the Group’s operation.

IFRS 1 and IAS 27 Amendements                       Amendments to IFRS 1 First-time Adoption of IFRSs and IAS 27
                                                       Consolidated and Separate Financial Statements — Cost of an Investment
                                                       in a Subsidiary, Jointly Controlled Entity or Associate
IFRS 3 (Revised)                                    Business Combinations
IAS 27 (Revised)                                    Consolidated and Separate Financial Statements
IFRS 7 Amendements                                  Amendments to IFRS 7 Financial Instruments: Disclosures — Improving
                                                       Disclosures about Financial Instruments
IFRS 8                                              Operating Segments
IAS 1 (Revised)                                     Presentation of Financial Statements
IAS 32 and IAS 1 Amendments                         Amendments to IAS 32 Financial Instruments: Presentation and IAS 1
                                                      Presentation of Financial Statements — Puttable Financial Instruments
                                                      and Obligations Arising on Liquidation
IFRIC 9 and IAS 39 Amendments                       Amendments to IFRIC 9 Reassessment of Embedded Derivatives and IAS 39
                                                      Financial Instruments: Recognition and Measurement — Embedded
                                                      Derivatives
IFRIC 16                                            Hedges of a Net Investment in a Foreign Operation



The principal effects of adopting these new and revised IFRSs and IFRIC interpretations are as follows:


The amendment to IAS 27 Consolidated and Separate Financial Statements — Cost of an Investment in a Subsidiary, Jointly
Controlled Entity or Associate requires all dividends from subsidiaries, associates or jointly-controlled entities to be recognised
in the income statement in the parent’s separate financial statements. The distinction between pre and post acquisition profits
is no longer required. However, the payment of such dividends requires the Company to consider whether there is an indicator
of impairment. The amendment is applied prospectively. The adoption of the amendments has had no significant impact on the
financial position or results of operations of the Group. As the Group is not a first-time adopter of IFRSs, the IFRS 1
Amendment is not applicable to the Group.


The Group has early adopted IFRS 3 Business Combination (Revised) and IAS 27 Consolidated and Separate Financial
Statements (Revised) as of 1 January 2009. IFRS 3 (Revised) introduces a number of changes in the accounting for business



                                                               F-21
combinations that impacts the amount of goodwill recognised, the reported result in the period that an acquisition occurs and
future reported results. IAS 27 (Revised) requires that a change in the ownership interest of a subsidiary is accounted for as
an equity transaction. The Group amended its accounting policy accordingly and did not result in any effect on the financial
position and operating results of these financial statements.


The amendments to IFRS 7 Financial Instruments: Disclosures — Improving Disclosures about Financial Instruments require
additional disclosures about fair value measurement and liquidity risk. Fair value measurements related to items recorded at fair
value are to be disclosed by source of inputs using a three level fair value hierarchy, by class, for all financial instruments
recognised at fair value. In addition, a reconciliation between the beginning and ending balance for level 3 fair value
measurements is now required, as well as significant transfers between levels in the fair value hierarchy. The amendments also
clarify the requirements for liquidity risk disclosures with respect to derivative transactions and assets used for liquidity
management. The fair value measurement disclosures are presented in Note 50. The liquidity risk disclosures are not
significantly impacted by the amendments and are presented in Note 49(b).


IFRS 8 Operating Segments requires disclosure of information about the Group’s operating segments and replaces the
requirement to determine primary (business) and secondary (geographical) reporting segments of the Group. Adoption of this
standard did not have any effect on the financial position of the Group. The Group determined that the operating segments were
the same as the business segments previously identified under IAS 14 Segment Reporting. Additional disclosures about each
of these segments are shown in note 48, including revised comparative information.


IAS 1 Presentation of Financial Statements (Revised) separates owner and non-owner changes in equity. The statement of
changes in equity includes only details of transactions with owners, with non-owner changes in equity presented as a single line.
In addition, it introduces the statement of comprehensive income: it presents all items of recognised income and expense, either
in one single statement or in two linked statements. The Group has elected to present two statements.


The amendments to IAS 32 Financial Instruments: Presentation provide a limited scope exception for puttable financial
instruments and instruments that impose specified obligations arising on liquidation to be classified as equity if they fulfill a
number of specified features. Amendments to IAS 1 Presentation of Financial Statements — Puttable Financial Instruments and
Obligations Arising on Liquidation require disclosure of certain information relating to these puttable financial instruments and
obligations classified as equity. As the Group currently has no such financial instruments or obligations, the amendments have
had no impact on the financial position or results of operations of the Group.


The amendment to IFRIC 9 Reassessment of Embedded Derivatives requires an entity to assess whether an embedded derivative
must be separated from a host contract when the entity reclassifies a hybrid financial asset out of the fair value through profit
or loss category. This assessment is to be made based on circumstances that existed on the later of the date the entity first
became a party to the contract and the date of any contract amendments that significantly change the cash flows of the contract.
IAS 39 has been revised to state that if an embedded derivative cannot be separately measured, the entire hybrid instrument
must remain classified as fair value through profit or loss in its entirety. The adoption of the amendments has had no significant
impact on the financial position or results of operations of the Group.


IFRIC 16 Hedges of a Net Investment in a Foreign Operation provides guidance on the accounting for a hedge of a net
investment in a foreign operation. This includes clarification that (i) hedge accounting may be applied only to the foreign
exchange differences arising between the functional currencies of the foreign operation and the parent entity; (ii) a hedging
instrument may be held by any entities within a group; and (iii) on disposal of a foreign operation, the cumulative gain or loss
relating to both the net investment and the hedging instrument that was determined to be an effective hedge should be
reclassified to the income statement as a reclassification adjustment. The adoption of the interpretation has had no significant
impact on the financial position or results of operations of the Group.


Apart from the above, in May 2008 the IASB has issued Improvements to IFRSs* which set out amendments to a number of
IFRSs primarily with a view to removing inconsistencies and clarifying wording. Except for the amendments to IFRS 5 which
is effective for annual periods on or after 1 July 2009, other amendments are effective for annual periods beginning on or after
1 January 2009 although there are separate transitional provisions for each standard. As a consequence of the early adoption
of IFRS 3 (Revised) and IAS 27 (Revised), the Group also early adopted the amendments to IFRS 2, IAS 38, IFRIC 9 and IFRIC
16 of Improvements to IFRSs issued in April 2009 by the IASB. While the adoption of some of the amendments results in
changes in accounting policies, none of these amendments has had a significant financial impact to the Group.


*     Improvements to IFRSs (2008) contain amendments to IFRS 5, IFRS 7, IAS 1, IAS 8, IAS 10, IAS 16, IAS 18, IAS 19,
      IAS 20, IAS 23, IAS 27, IAS 28, IAS 29, IAS 31, IAS 34, IAS 36, IAS 38, IAS 39, IAS 40 and IAS 41.



                                                              F-22
3.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


(1)    Subsidiaries


A subsidiary is an entity whose financial and operating policies the Bank controls, directly and indirectly, so as to obtain
benefits from its activities.


The results of subsidiaries are included in the Bank’s income statement to the extent of dividends received and receivable. The
Bank’s investments in subsidiaries are stated at cost less any impairment losses.


(2)    Jointly-controlled entities


A jointly-controlled entity is a joint venture, not being a subsidiary or an associate, that is subject to joint control, resulting
in none of the participating parties having unilateral control over the economic activity of the jointly-controlled entity.


The Group’s investments in jointly-controlled entities are accounted for under the equity method of accounting. Under the
equity method, an investment in a jointly-controlled entity is carried in the consolidated statement of financial position at cost
plus post-acquisition changes in the Group’s share of the net assets of the jointly-controlled entity, less any impairment losses.
Goodwill relating to a jointly-controlled entity is included in the carrying amount of the investment and is not amortised. After
application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with
respect to the Group’s net investment in the jointly-controlled entity. The consolidated income statement reflects the share of
the results of operations of the jointly-controlled entity. Where there has been a change recognised directly in the equity of the
jointly-controlled entity, the Group recognises its share of any changes and discloses this, when applicable, in the consolidated
statement of changes in equity. Profits and losses resulting from transactions between the Group and the jointly-controlled
entities are eliminated to the extent of the Group’s interests in the jointly-controlled entities.


The results of the jointly-controlled entities are included in the Bank’s income statement to the extent of dividends received
and receivable. The Bank’s investments in jointly-controlled entities are stated at cost less any impairment losses.


The reporting periods of the jointly-controlled entities and the Group are identical and the jointly-controlled entities’ accounting
policies conform to those used by the Group for like transactions and events in similar circumstances.


(3)    Associates


An associate is an entity, not being a subsidiary or a jointly-controlled entity, in which the Group has a long term interest of
generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence.


The Group’s investments in associates are accounted for under the equity method of accounting. Under the equity method, an
investment in an associate is carried in the consolidated statement of financial position at cost plus post-acquisition changes
in the Group’s share of the net assets of the associate, less any impairment losses. Goodwill relating to an associate is included
in the carrying amount of the investment and is not amortised. After application of the equity method, the Group determines
whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the associate.
The consolidated income statement reflects the share of the results of operations of the associate. Where there has been a change
recognised directly in the equity of the associate, the Group recognises its share of any changes and discloses this, when
applicable, in the consolidated statement of changes in equity. Profits and losses resulting from transactions between the Group
and the associates are eliminated to the extent of the Group’s interests in the associates.


The results of the associates are included in the Bank’s income statement to the extent of dividends received and receivable.
The Bank’s investments in associates are stated at cost less any impairment losses.


The reporting periods of the associates and the Group are identical and the associates’ accounting policies conform to those used
by the Group for like transactions and events in similar circumstances.


(4)    Foreign currency translation


The consolidated financial statements are presented in RMB, being the functional and presentation currency of the Bank’s
operations in Mainland China. Each entity in the Group determines its own functional currency and the financial statements of
each entity are presented using that functional currency.



                                                               F-23
Foreign currency transactions are translated into the functional currency using the exchange rates ruling at the dates of
transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the
applicable exchange rates ruling at the end of the reporting period. Exchange differences arising on the settlement of monetary
items or on translating monetary items at period end rates are recognised in the income statement, with the exception of all
monetary items that provide an effective hedge against a net investment in a foreign entity which are taken directly to other
comprehensive income until the disposal of the net investment, at which time they are recognised in the income statement. Tax
charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive
income.


Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates ruling at
the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the
exchange rates ruling at the date when the fair value was determined. Any goodwill arising on the acquisition of a foreign
operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated
as assets and liabilities of the foreign operation and translated at the rates ruling at the end of the reporting period.


As at the end of the reporting period, the assets and liabilities of foreign operations are translated into the presentation currency
of the Bank at the exchange rates ruling at the end of the reporting period. All items within equity except for retained profits
are translated at the exchange rates ruling at the dates of the initial transactions. Their income statements are translated at the
weighted average exchange rates for the year. The exchange differences arising on the above translation are taken directly to
other comprehensive income. On disposal of a foreign operation, the deferred cumulative amount recognised in other
comprehensive income relating to that particular foreign operation is recognised in the income statement.


Cash flows arising from transactions in foreign currencies and cash flows of overseas subsidiaries are translated using the
weighted average exchange rates for the year. The effect of exchange rate movements on cash is presented separately in
statement of cash flows as a reconciling item.


(5)    Financial instruments


A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.


Initial recognition of financial instruments


At initial recognition, financial assets are classified into four categories: financial assets at fair value through profit or loss,
held-to-maturity financial investments, loans and receivables and available-for-sale financial assets.


At initial recognition, financial liabilities are classified into two categories: financial liabilities at fair value through profit or
loss and other financial liabilities.


A financial asset or financial liability is measured initially at its fair value plus, in the case of a financial asset or financial
liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the
financial asset or financial liability.


Measurement of fair value


The fair value of a financial asset or financial liability traded in active markets is based on its quoted market price.


For all other financial instruments not listed in an active market, the fair value is determined by using appropriate valuation
techniques. Valuation techniques include making reference to the prices from recent arm’s length market transactions between
knowledgeable and willing parties, if available, current fair value of another instrument that is substantially the same,
discounted cash flow analysis and option pricing models.


Financial assets or financial liabilities at fair value through profit or loss


Financial assets or financial liabilities at fair value through profit or loss include financial assets or financial liabilities held
for trading and financial assets or financial liabilities designated at fair value through profit or loss.


Financial assets or financial liabilities held for trading


A financial asset or financial liability is classified as held for trading if:



                                                                F-24
(i)     it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;


(ii)    on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which
        there is evidence of a recent actual pattern of short term profit-taking; or


(iii)   it is a derivative.


Financial assets held for trading mainly includes debt securities, equity investments and derivatives that are not designated as
effective hedging instruments. Financial liabilities held for trading mainly includes short positions in securities.


Financial assets or financial liabilities held for trading are measured at fair value after initial recognition. Realised or unrealised
incomes or expenses are recognised in the income statement. Derivatives are separately presented and disclosed in the financial
statements, and accounting policies of derivatives are shown in note 3(9).


Financial assets or financial liabilities designated at fair value through profit or loss


A financial instrument may be designated as a financial asset or financial liability at fair value through profit or loss upon initial
recognition, if it meets any of the criteria set out below, and is so designated by management.


(i)     It eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from
        measuring the financial asset or financial liability or from recognising the gains and losses on them on different bases;


(ii)    It applies to a group of financial assets, financial liabilities or both which is managed and its performance evaluated on
        a fair value basis, in accordance with a documented risk management or investment strategy, and where information about
        that group of financial instruments is provided internally on that basis to key management personnel; or


(iii)   The financial instrument contains an embedded derivative, unless the embedded derivative does not significantly modify
        the cash flows or it is clear, with little or no analysis, that it would not be separately recorded.


In the case of an equity investment, if neither a quoted market price in an active market exists nor its fair value can be reliably
measured, it cannot be designated as a financial asset at fair value through profit or loss.


Financial assets designated at fair value through profit or loss mainly include debt securities. Financial liabilities designated
at fair value through profit or loss mainly include structured deposits, notes payable and certificates of deposits. These assets
and liabilities are measured at fair value after initial recognition. Realised or unrealised income or expenses are recognised in
the income statement.


Held-to-maturity financial investments


Held-to-maturity financial investments are non-derivative financial assets with fixed or determinable payments and a fixed
maturity and which the Group has the positive intention and ability to hold to maturity. After initial measurement,
held-to-maturity financial investments are subsequently measured at amortised cost using the effective interest method, less any
allowance for impairment. Gains and losses are recognised in the income statement when the held-to-maturity financial
investments are derecognised or impaired, as well as through the amortisation process. All the held-to-maturity financial
investments are bond investments.


The Group shall reclassify any remaining held-to-maturity investments as available for sale and shall not classify any financial
assets as held-to-maturity during the current financial year or during the two preceding financial years, if the Group has sold
or reclassified more than an insignificant amount of held-to-maturity investments before maturity (more than insignificant in
relation to the total amount of held-to-maturity investments) except for sale or reclassification that:


(i)     is so close to maturity or the financial asset’s call date (for example, less than three months before maturity) that changes
        in the market rate of interest would not have a significant effect on the financial asset’s fair value;


(ii)    occurs after the entity has collected substantially all of the financial asset’s original principal through scheduled
        payments or prepayments; or


(iii)   is attributable to an isolated event that is beyond the entity’s control, is non-recurring and could not have been reasonably
        anticipated by the entity.



                                                                F-25
Loans and receivables


Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market and the Group has no intention of trading the assets immediately or in the near term. After initial measurement, such
assets are subsequently carried at amortised cost using the effective interest method, less any allowance for impairment losses.
Gains and losses are recognised in the income statement when such assets are derecognised or impaired, as well as through the
amortisation process. Loans and receivables mainly include loans and advances to customers, receivables and discounted bills.


Discounted bills are granted by the Group to its customers based on the bank acceptance held which has not matured.
Discounted bills are carried at face value less unrealised interest income and the interest income of the discounted bills is
recognised using the effective interest method.


Available-for-sale financial assets


Available-for-sale financial assets are non-derivative financial assets which are designated as such or are not classified in any
of the three preceding categories. After initial recognition, available-for-sale financial assets are subsequently measured at fair
value. Premiums and discounts on available-for-sale financial assets are amortised using the effective interest method and are
taken to the income statement as interest income or expense. Changes in fair value of available-for-sale financial assets are
recognised as a separate component of other comprehensive income until the financial asset is derecognised or determined to
be impaired at which time the cumulative gains or losses previously recorded in other comprehensive income are transferred
to the income statement. Dividend and interest income on available-for-sale financial assets are recorded in the income
statement.


In the case of an equity investment classified as available-for-sale, if neither a quoted market price in an active market exists
nor its fair value can be reliably measured, it will be measured at cost less any impairment loss.


Other financial liabilities


Other financial liabilities are carried at amortised costs using the effective interest method.


(6)   Impairment of financial assets


An assessment on carrying amount of financial assets is made at the end of each reporting period. Impairment is recognised
if there is objective evidence of impairment of financial assets, i.e., one or more events that occur after the initial recognition
of those assets and have an impact on the estimated future cash flows of the financial assets or group of financial assets that
can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is
experiencing significant financial difficulty, default or delinquency in interest or principal payments, they would probably enter
into bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the
estimated future cash flows.


Financial assets carried at amortised cost


If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments has been
incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of
estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s
original effective interest rate and shall include the value of any relevant collaterals. The original effective interest rate is the
rate used to determine the values of financial assets at initial recognition. With respect to floating-rate loans, receivables and
held-to-maturity investments, the discount rate could be the current effective interest rate determined under the contract. The
carrying amount of the asset is reduced through the use of an impairment provision account and the amount of the loss is
recognised in the income statement.


The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually
significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no
objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is
included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively
assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues
to be recognised are not included in a collective assessment of impairment.



                                                               F-26
Future cash flows of a group of financial assets that are collectively evaluated for impairment are estimated on the basis of
historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is
adjusted on the basis of current observable data to reflect the impact of current conditions that did not affect the period on which
the historical loss experience is based and to eliminate the impact of historical conditions that do not exist currently. The
methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group.


If, in a subsequent period, the amount of an impairment loss decreases and the decrease can be attributed objectively to an event
occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal
of an impairment loss is recognised in the income statement, to the extent that the carrying value of the assets does not exceed
its amortised cost at the reversal date.


When an item of loans and receivables is uncollectible, it is written off against the related allowance for impairment losses.
Such loans and receivables are written off after all the necessary procedures have been completed and the amount of the loss
has been determined. Subsequent recoveries of the amounts previously written off decrease the amount of the provision for loan
impairment in the income statement.


Financial assets carried at cost


If there is objective evidence that an impairment loss has been incurred on the financial asset, the amount of impairment loss,
measured as the difference between the carrying amount of that financial asset and the present value of estimated future cash
flows discounted at the current market rate of return for a similar financial asset, is recognised in the income statement.
Impairment losses on these assets are not reversed.


Available-for-sale financial assets


If there is objective evidence that the asset is impaired, the cumulative loss, measured as the difference between the acquisition
cost (net of any principal repayment and amortisation) and the current fair value, less any impairment loss on that financial asset
previously recognised in the income statement, is removed from other comprehensive income and recognised in the income
statement.


In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged
decline in the fair value of the investment below its cost. Impairment losses on equity investments are not reversed through the
income statement; increases in their fair value after impairment are recognised as other comprehensive income.


In the case of debt instruments classified as available-for-sale, if, in a subsequent period, the fair value of a debt instrument
increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the
income statement, the impaired loss is reversed through the income statement.


(7)   Renegotiated loans


Where possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve extending
the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated, the loan is no
longer considered past due. Management continuously reviews renegotiated loans to ensure that all criteria are met and that
future payments are likely to occur. The loans continue to be subject to individual or collective impairment assessment,
calculated using the loan’s original effective interest rate.


(8)   Derecognition of financial assets and liabilities


Financial assets


A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised
when:


•     The rights to receive cash flows from the assets have expired; or


•     The Group has transferred its rights to receive cash flows from the assets; or has retained its rights to receive cash flows
      from the assets but has assumed an obligation to pay them in full without material delay to a third party under a
      “pass-through” arrangement; and



                                                               F-27
•      The Group has transferred substantially all the risks and rewards of ownership of the financial asset; or the Group has
       neither transferred nor retained substantially all the risks and rewards of ownership of the financial asset, but has
       transferred control of the asset.


Where the Group has transferred its rights to receive cash flows from an asset or has retained its rights to receive cash flows
from the assets but has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the
risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing
involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at
the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be
required to repay.


Securitisation


As part of its operational activities, the Group securitises financial assets, generally through the sale of these assets to SPEs
which issue securities to investors. The transferred assets may qualify for derecognition in full or in part. Further details on
prerequisites for derecognition of financial assets are set out above. Interests in the securitised financial assets may be partially
retained by the Group and are primarily classified as available-for-sale financial assets. The book value of the transferred asset
should be recognised between the derecognised portion and the retained portion based on their respective relative fair values,
and the difference between the book value of the derecognised portion and the total consideration paid for the derecognised
portion shall be recorded in the profit or loss.


Financial liabilities


A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original
liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income
statement.


(9)    Derivatives and hedge accounting


Derivatives


The Group uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its risks
associated with foreign currency and interest rate fluctuations. Such derivative financial instruments are initially recognised at
fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives
are carried as assets when the fair value is positive and as liabilities when the fair value is negative.


Certain derivatives embedded in other financial instruments are treated as separate derivatives when their economic
characteristics and risks are not closely related to those of the host contract and the hybrid instrument is not carried at fair value
through profit or loss. These embedded derivatives are measured at fair value with the changes in fair value recognised in the
income statement.


Any gains or losses arising from changes in fair value on derivatives that do not qualify for hedge accounting are taken directly
to the income statement.


For less complex derivative products, the fair values are principally determined by valuation models which are commonly used
by market participants. Inputs to valuation models are determined from observable market data wherever possible, including
foreign exchange spot and forward rates and interest rate yield curves. For more complex derivative products, the fair values
are mainly determined by quoted prices from dealers.


Hedge accounting


At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the
Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The
documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being
hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged
item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving
offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they have actually been
highly effective throughout the financial reporting periods for which they were designated.



                                                                F-28
Certain derivative transactions, while providing effective economic hedges under the Group’s risk management positions, do
not qualify for hedge accounting under IAS 39 and are therefore treated as derivatives held for trading with fair value gains
or losses recognised in the income statement. Hedges which meet the strict criteria for hedge accounting are accounted for in
accordance with the Group’s accounting policy as set out below.


Fair value hedges


Fair value hedges are hedges of the Group’s exposure to changes in the fair value of a recognised asset or liability or an
unrecognised firm commitment, or an identified portion of such an asset, liability or unrecognised firm commitment, that is
attributable to a particular risk and could affect the profit or loss. For fair value hedges, the carrying amount of the hedged item
is adjusted for gains and losses attributable to the risk being hedged, the derivative is remeasured at fair value and the gains
and losses from both are taken to the income statement.


For hedged items recorded at amortised cost, the difference between the carrying value of the hedged item and the face value
is amortised over the remaining term of the original hedge using the effective interest method.


When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of
the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss
recognised in the income statement. The changes in the fair value of the hedging instrument are also recognised in the income
statement.


The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, the
hedge no longer meets the criteria for hedge accounting or the Group revokes the designation.


Cash flow hedges


Cash flow hedges are hedges of the Group’s exposure to variability in cash flows that is attributable to a particular risk
associated with a recognised asset or liability or a highly probable forecast transaction and could affect profit or loss. For
designated and qualifying cash flow hedges, the effective portion of the gain or loss on the hedging instrument is initially
recognised directly in other comprehensive income. The ineffective portion of the gain or loss on the hedging instrument is
recognised immediately in the income statement.


When the hedged cash flow affects the income statement, the gain or loss on the hedging instrument recognised directly in other
comprehensive income is recycled in the corresponding income or expense line of the income statement. When a hedging
instrument expires, or is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in other comprehensive income at that time remains in other comprehensive income until the
hedged forecast transaction ultimately occurs. When a forecast transaction is no longer expected to occur, the cumulative gain
or loss that was reported in other comprehensive income is immediately transferred to the income statement.


(10)   Trade date accounting


All regular way purchases and sales of financial assets are recognised at the trade date, which is the date that the Group commits
to purchase or sell the assets. A regular way purchase or sale is the purchase or sale of financial assets that requires delivery
of assets within the time frame generally established by regulation or convention in the marketplace.


(11)   Offsetting of financial instruments


Financial assets and liabilities are offset and the net amount is reported in the statement of financial position if, and only if,
the Group has a legally enforceable right to offset such amounts with the same counterparty and an intention to settle on a net
basis, or to realise the asset and settle the liability simultaneously.


(12)   Repurchase and reverse repurchase transactions


Assets sold under agreements to repurchase at a specified future date (“repos”) are not derecognised from the statement of
financial position. The corresponding cash received, including accrued interest, is recognised on the statement of financial
position as a “repurchase agreement”, reflecting its economic substance as a loan to the Group. The difference between the sale
and repurchase prices is treated as an interest expense and is accrued over the life of the agreement using the effective interest
method.



                                                               F-29
Conversely, assets purchased under agreements to resell at a specified future date (“reverse repos”) are not recognised on the
statement of financial position. The corresponding cash paid, including accrued interest, is recognised on the statement of
financial position as a “reverse repurchase agreement”. The difference between the purchase and resale prices is treated as an
interest income and is accrued over the life of the agreement using the effective interest method.


(13)   Property and equipment


Property and equipment, other than construction in progress were stated at cost less accumulated depreciation and any
impairment losses. The cost of an item of property and equipment comprises its purchase price and any directly attributable
costs of bringing the asset to its present working condition and location for its intended use. Expenditure incurred after items
of property and equipment have been put into operation, such as repairs and maintenance, is normally charged to the income
statement in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a
major inspection is capitalised in the carrying amount of the asset as a replacement.


Construction in progress comprises the direct costs of construction during the period of construction and is not depreciated.
Construction in progress is reclassified to the appropriate category of property and equipment when completed and ready for
use.


The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate
that the carrying values may not be recoverable.


Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment, less any
estimated residual value, over the estimated useful life. The estimated useful life, estimated residual value and the annual
depreciation rate of each item of property, plant and equipment are as follows:

                                                                           Estimated            Estimated              Annual
                                                                           useful life        residual value       depreciation rate

Properties and buildings . . . . . . . . . . . . . . . . . . . . . .          5 - 35 years                  3%       2.77% - 19.40%


Office equipment and computers . . . . . . . . . . . . . . . . .               3 - 5 years                     —    20.00% - 33.33%


Motor vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . .          4 - 6years                     —    16.67% - 25.00%


Leasehold improvements . . . . . . . . . . . . . . . . . . . . . .                           Over the shorter of the economic useful
                                                                                                     lives and remaining lease terms

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a
reasonable basis among the parts and each part is depreciated separately.


Residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at least at each financial year
end.


An item of property and equipment and any significant part initially recognised is derecognised upon disposal or when no future
economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in
the year the asset is derecognized.


(14)   Land use rights


Land use rights are recognised at cost, being the fair value at the time of injection from the central government of the PRC (the
“Government”) or the consideration paid. The rights are amortised using the straight-line basis over the period of the leases.
When the prepaid land lease payments cannot be allocated reliably between the land and buildings elements, the entire lease
payments are included in the cost of properties and buildings as finance leases in property and equipment.


(15)   Repossessed assets


Collateral assets for loans and advances are repossessed by the Group when the borrowers are unable to honour their
repayments, and would be realised in settlement of the related outstanding debts. Repossessed assets are initially recognised
at the carrying amount of the related loan principal and interest receivable, net of allowance for impairment losses. The Group’s



                                                                    F-30
repossessed assets are reviewed at the end of each reporting period by management to assess whether they are recorded in excess
of their recoverable amount, and if their carrying value exceeds the recoverable amount, the assets are written down. Any
impairment loss, being the difference between the estimated net recoverable amount and the carrying value, is charged to the
income statement.


(16)   Business combination and goodwill


Business combinations from 1 January 2009


Business combinations are accounted for using the acquisition method. Goodwill arising from a business combination is
initially measured at cost, being the excess of the aggregate of i) the consideration transferred, measured at acquisition-date
fair value, ii) the amount of any non-controlling interest in the acquiree, and iii) in a business combination achieved in stages,
the acquisition-date fair value of the Group’s previously held equity interest in the acquiree over the net fair value of the
acquired identifiable assets, assumed liabilities and contingent liabilities as at the date of acquisition. For each business
combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share
of the acquiree’s identifiable net assets. Acquisition-related costs incurred are expensed.


When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition
date. This includes the separation of embedded derivatives in host contracts by the acquiree.


If the business combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest
in the acquiree is remeasured to fair value as at the acquisition date through profit or loss.


Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration which is deemed to be a financial asset or liability, are recognised in
accordance with IAS 39 either in profit or loss or in other comprehensive income. If the contingent consideration is classified
as equity, it shall not be remeasured until it is finally settled within equity.


Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.


The carrying amount of goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired.


For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to
each of the Group’s cash-generating units (“CGU”), or groups of CGUs, that are expected to benefit from the synergies of the
combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each
unit or group of units to which the goodwill is allocated:


•      Represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and


•      Is not larger than a segment based on the Group’s reporting format determined in accordance with IFRS 8 Operating
       Segments.


Where goodwill forms part of a CGU (or groups of CGUs) and part of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss
on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation
disposed of and the portion of the CGU retained. An impairment loss recognised for goodwill is not reversed in a subsequent
period.


When subsidiaries are sold, the difference between the selling price and the net assets plus cumulative translation differences
and goodwill is recognised in the income statement.


Business combinations prior to 31 December 2008


In comparison to the above-mentioned requirements, the following differences applied:


Business combinations were accounted for using the purchase method. Transaction costs directly attributable to the acquisition
formed part of the acquisition costs. The non-controlling interest (formerly known as minority interest) was measured at the
proportionate share of the acquiree’s identifiable net assets. Business combinations achieved in stages were accounted for as



                                                               F-31
separate steps. Additional acquired share of interest, if any, did not affect previously recognised goodwill. When the Group
acquired a business, embedded derivatives separated from the host contract by the acquiree were not reassessed on acquisition
unless the business combination resulted in a change in the terms of the contract that significantly modified the cash flows that
otherwise would have been required under the contract. Contingent consideration was recognised if, and only if, the Group had
a present obligation, the economic outflow was more likely than not and a reliable estimate was determinable. Subsequent
adjustments to the contingent consideration affected goodwill.


(17)      Impairment of non-financial assets other than goodwill and deferred tax assets


The Group assesses at the end of each reporting period whether there is any indication that an asset may be impaired. If any
such indication exists, or when impairment testing for an asset is required, the Group makes an estimate of the asset’s
recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is
determined on an individual basis, unless the asset does not generate cash inflows that are largely independent of those from
other assets or groups of assets, in which case the recoverable amount is determined for the CGU to which the asset belongs.
Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered to be impaired and is written
down to its recoverable amount. In assessing value in use of an asset, the estimated future cash flows are discounted to their
present values using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset. Impairment losses of continuing operations are recognised in the income statement.


An assessment is made at the end of each reporting period as to whether there is any indication that previously recognised
impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated.
A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the
asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset
is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been
determined, net of any depreciation/amortisation, had no impairment loss been recognised for the asset in prior years. Such
reversal is recognised in the income statement. After such a reversal, the depreciation/amortisation charge is adjusted in future
periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful
life.


(18)      Cash and cash equivalents


Cash and cash equivalents refer to short term highly liquid assets, which are readily convertible into known amounts of cash
and subject to an insignificant risk of changes in value. Cash and cash equivalents comprise cash, unrestricted balances with
central banks, and amounts due from banks and other financial institutions and reverse repurchase agreements with original
maturity of less than three months.


(19)      Leases


Leases which transfer substantially all the risks and rewards of ownership of the assets to the lessees are classified as finance
leases. Leases where substantially all the rewards and risks of the assets remain with the lessor are accounted for as operating
leases.


Finance leases


When the Group is a lessor under finance leases, an amount representing the minimum lease payment receivables and initial
direct costs is included in the statement of financial position as loans and advances to customers. Any unguaranteed residual
value is also recognised at the inception of the lease. The difference between the sum of the minimum lease payment
receivables, initial direct costs, the unguaranteed residual value and their present value is recognised as unearned finance
income. Unearned finance income is recognised over the period of the lease using the effective interest method.


Operating leases


Rental payments applicable to operating leases are charged to the income statement on the straight-line basis over the lease
terms.




                                                             F-32
(20)    Related parties


A party is considered to be related to the Group if:


(i)     The party, directly or indirectly through one or more intermediaries, (a) controls, is controlled by, or is under common
        control with, the Group; (b) has an interest in the Group that gives it significant influence over the Group; or (c) has
        joint control over the Group;


(ii)    The party is an associate of the Group;


(iii)   The party is a joint venture in which the Group is a venturer;


(iv)    The party is a member of the key management personnel of the Bank or its parent company;


(v)     The party is a close member of the family of any individual referred to in (i) or (iv);


(vi)    The party is an entity that is controlled, jointly-controlled or significantly influenced by, or for which significant voting
        power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or


(vii)   The party is a post-employment benefit plan for the benefit of the employees of the Group, or of any entity that is a
        related party of the Group.


(21)    Recognition of income and expense


Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and when the revenue
can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:


Interest income and expense


For all financial instruments measured at amortised cost and interest-generating financial instruments classified as
available-for-sale financial assets, interest income or expense is recorded at the effective interest rate, which is the rate that
exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter
period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into
account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental
costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit
losses. The carrying amount of the financial asset or financial liability is adjusted if the Group revises its estimates of payments
or receipts. The adjusted carrying amount is calculated based on the original effective interest rate and the change in carrying
amount is recorded in profit or loss.


Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest
income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the
impairment loss.


Fee and commission income


The Group earns fee and commission income from a diverse range of services it provides to its customers. Fee income can be
divided into the following two categories:


(i)     Fee income on transactions conducted or from services provided over a period of time


Fee income is recognised on the basis of when the transaction is completed or on accrual basis when the service is provided
over a period of time. These fees mainly include fee income on settlement and clearing business, commission income and fee
income on asset management, custody and other management advisory services.


(ii)    Fee income from providing transaction services


Fees arising from negotiating or participating in the negotiation of a transaction for a third party, such as the arrangement of
the acquisition of shares or other securities or the purchase or sale of businesses, are recognised on completion of the underlying
transaction. Fees or components of fees that are linked to a certain performance are recognised after fulfilling the corresponding
criteria.



                                                                F-33
The fair value of the award credits granted to the bank card holders is deferred and recognised as fee and commission income
when the award credits are redeemed or expired.


Dividend income


Dividend income is recognised when the Group’s right to receive payment has been established.


Net trading income


Results arising from trading activities include all gains and losses from changes in fair value for financial assets and financial
liabilities that are held for trading. This includes gains and losses from changes in fair value relating to the ineffective portion
of the hedging arrangements.


(22)   Income tax


Income tax comprises current and deferred income tax. Income tax is recognised in the income statement except that it relates
to items recognised directly in equity, in which case it is recognised in equity.


Current tax


Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from
or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted by the end of each reporting period.


Deferred income tax


Deferred income tax is provided using the liability method on temporary differences at the end of the reporting period between
the tax bases of assets and liabilities and their carrying amounts.


Deferred income tax liabilities are recognised for all taxable temporary differences, except:


(i)    Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a
       transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit
       nor taxable income or deductible expenses; and


(ii)   In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint
       ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the
       temporary differences will not be reversed in the foreseeable future.


Deferred income tax assets are recognised for all deductible temporary differences, carryforward of unused tax credits and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences, and the carryforward of unused tax credits and unused tax losses can be utilised, except:


(i)    Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition
       of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither
       the accounting profit nor taxable income or deductible expenses; and


(ii)   In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in
       joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary
       differences will be reversed in the foreseeable future and taxable profit will be available against which the temporary
       differences can be utilised.


Deferred income tax assets and deferred income tax liabilities are measured at the tax rates that are expected to apply to the
period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of each reporting period and reflect the corresponding tax effect.


The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the extent
that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred income tax asset
to be utilised. When it is virtually probable that sufficient taxable income will be available, the reduced amount can be reversed
accordingly.



                                                                F-34
Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation
authority.


(23)   Employee benefits


Employee benefits refer to all forms of consideration and other related expenditure given by the Group in exchange for services
rendered by employees. The benefits payable are recognised as liabilities during the period in which the employees have
rendered services to the Group. If the effect of discounting the benefits payable which are payable after one year from the end
of the reporting period is significant, the Group will present them at their present value.


Statutory defined contribution plans


In accordance with the relevant laws and regulations, domestic employees of the Group participate in various social insurance
schemes like basic pension insurance, medical insurance, unemployment insurance and housing fund schemes administered by
the local government authorities. The Group calculates and contributes to the local government agencies the above pension and
insurance schemes using applicable contribution basis and rates stipulated in the relevant local regulations in the period the
employees providing their services to the Group. Contributions to these plans are recognised in the income statement as
incurred.


All eligible employees outside Mainland China participate in local defined contribution schemes. The Group contributes to
these defined contribution schemes based on the requirements of the local regulatory bodies.


Retirement benefit annuity plan


In addition, employees in Mainland China also participate in a defined contribution retirement benefit plan established by the
Bank (the “Annuity Plan”). The Bank and its employees are required to contribute a certain percentage of the employees’
previous year basic salaries to the Annuity Plan. The contribution is charged to the income statement when it incurs. The Bank
pays a fixed contribution into the Annuity Plan and has no obligation to pay further contributions if the Annuity Plan does not
hold sufficient assets to pay all employees benefits.


Termination benefits


Termination benefits are payable whenever an employee’s employment is voluntarily terminated before the normal retirement
date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises retirement
benefits in the income statement when it is demonstrably committed to terminate the employment of current employees
according to a detailed formal plan without possibility of withdrawal.


Early retirement benefits


According to the Bank‘s policy on early retirement benefits, certain employees are entitled to take leave of absence and in return
receive a certain level of staff salaries and related benefits from the Bank. The salaries and benefit payments are made from
the date of early retirement to the normal retirement date. The amounts of retirement benefit expense and present value of these
liabilities are dependent on assumptions used in calculating such amounts. These assumptions include discount rates, retirement
benefit growth rates and other factors. Gains and losses arising from the changes in assumptions and amendments to pension
plans are recognised in the income statement as incurred.


(24)   Fiduciary activities


Where the Group acts in a fiduciary capacity such as custodian or agent, assets arising thereon together with related
undertakings to return such assets to customers are excluded from the statement of financial position.


The Group grants entrusted loans on behalf of trustors, which are recorded off-balance sheet. The Group, as a trustee, grants
such entrusted loans to borrowers under the direction of those trustors who fund these loans. The Group has been contracted
by those trustors to manage the administration and collection of these loans on their behalf. Those trustors determine both the
underwriting criteria for and the terms of all entrusted loans including their purposes, amounts, interest rates, and repayment
schedules. The Group charges a commission related to its activities in connection with entrusted loans which are recognised
ratably over the period in which the service is provided. The risk of loss is borne by those trustors.



                                                              F-35
(25)   Financial guarantee contracts


The Group issues financial guarantee contracts, including letters of credit, letters of guarantee and acceptance. These financial
guarantee contracts provide for specified payments to be made to reimburse the holders for the losses they incur when a
guaranteed party defaults under the original or modified terms of a debt instrument, loan or any other obligation.


The Group initially measures all financial contracts at fair value, in other liabilities, being the premium received. This amount
is recognised ratably over the period of the contract as fee and commission income. Subsequently, the liabilities are measured
at the higher of the initial fair value less cumulative amortisation and the best estimate of expenditure required to settle any
financial obligation arising as a result of the guarantee. Any increase in the liability relating to a financial guarantee is taken
to the income statement.


(26)   Provisions


Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.


Where the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the
reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expenses relating to
any provision is presented in the income statement net of any reimbursement.


(27)   Contingent liabilities


A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also
be a present obligation arising from past events that is not recognised because it is not probable that an outflow of economic
resources will be required or the amount of obligation cannot be measured reliably. Contingent liabilities are disclosed in the
notes to the financial statements. When a change in the probability of an outflow occurs so that outflow is probable and can
be reliably estimated, it will then be recognised as a provision.


(28)   Dividends


Dividends are recognised as a liability and deducted from equity when they are approved by the Bank’s shareholders in general
meeting and declared. Interim dividends are deducted from equity when they are approved and declared, and no longer at the
discretion of the Bank. Dividend for the year that is approved after the end of the reporting period is disclosed as an event after
the reporting period.


4.     SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES


In the process of applying the Group’s accounting policies, management has used its judgements and made assumptions of the
effects of uncertain future events on the financial statements. The most significant use of judgements and key assumptions
concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period, are
described below.


Designation of held-to-maturity investments


Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity
investments when the Group has the positive intention and ability to hold the investments to maturity. Accordingly, in
evaluating whether a financial asset shall be classified as a held-to-maturity investment, significant management judgement is
required. If the Group fails to correctly assess its intention and ability to hold the investments to maturity and the Group sells
or reclassifies more than an insignificant amount of held-to-maturity investments before maturity, the Group shall reclassify the
whole held-to-maturity investment portfolio as available-for-sale.


Impairment losses of loans and advances and amounts due from banks and other financial institutions


The Group determines periodically whether there is any objective evidence that impairment losses have occurred on loans and
advances and amounts due from banks and other financial institutions. If any such evidence exists, the Group assesses the



                                                              F-36
amount of impairment losses. The amount of impairment losses is measured as the difference between the carrying amount and
the present value of estimated future cash flows. Assessing the amount of impairment losses requires significant judgement on
whether the objective evidence for impairment exists and also significant estimates when determining the present value of the
expected future cash flows.


Impairment losses of available-for-sale and held-to-maturity investments


In determining whether there is any objective evidence that impairment losses have occurred on available-for-sale and
held-to-maturity investments, the Group assesses periodically whether there has been a significant or prolonged decline in the
fair value below its cost or carrying amount, or whether other objective evidence of impairment exists based on the investee’s
financial conditions and business prospects, including industry environment, change of technology as well as operating and
financing cash flows. This requires a significant level of judgement of management, which would affect the amount of
impairment losses.


Impairment of goodwill


The Group determines whether goodwill is impaired at least on an annual basis and when circumstances indicate that the
carrying value may be impaired. This requires an estimation of the recoverable amount of the CGU or groups of CGUs to which
the goodwill is allocated. Estimating the recoverable amount requires the Group to make an estimate of the expected future cash
flows from the CGU or groups of CGUs and also to choose a suitable discount rate in order to calculate the present value of
those cash flows.


Income tax


Determining income tax provisions requires the Group to estimate the future tax treatment of certain transactions. The Group
carefully evaluates tax implications of transactions in accordance with prevailing tax regulations and makes tax provisions
accordingly. In addition, deferred income tax assets are recognised to the extent that it is probable that future taxable profit will
be available against which the deductible temporary differences can be utilised. This requires significant estimation on the tax
treatments of certain transactions and also significant assessment on the probability that adequate future taxable profits will be
available for the deferred income tax assets to be recovered.


Fair value of financial instruments


If the market for a financial instrument is not active, the Group establishes fair value by using a valuation technique. Valuation
techniques include using recent arm’s length market transactions between knowledgeable and willing parties, if available,
reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option
pricing models. To the extent practicable, valuation technique makes maximum use of market inputs. However, where market
inputs are not available, management needs to make estimates on such unobservable market inputs.


5.     IMPACT OF ISSUED BUT NOT YET EFFECTIVE INTERNATIONAL FINANCIAL REPORTING
       STANDARDS


The Group has not applied the following new and revised IFRSs and IFRIC interpretations that have been issued but are not
yet effective, in these financial statements.

                                                                                                        1
IFRS 1 (Revised)               First-time Adoption of International Financial Reporting Standards
IFRS 1 Amendments              Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards —
                                 Additional Exemptions for First-time Adopters 2
IFRS 2 Amendments              Amendments to IFRS 2 Share-based Payment — Group Cash-settled Share-based Payment
                                 Transactions 2
                                                       6
IFRS 9                         Financial Instruments
                                                            5
IAS 24 (Revised)               Related Party Disclosures
                                                                                                                                    3
IAS 32 Amendment               Amendment to IAS 32 Financial Instruments: Presentation — Classification of Rights Issues
IAS 39 Amendment               Amendment to IAS 39 Financial Instruments: Recognition and Measurement — Eligible Hedged
                                 Items 1
                                                                                                                 5
IFRIC 14 Amendments            Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement
                                                                               1
IFRIC 17                       Distributions of Non-cash Assets to Owners
                                                                                               4
IFRIC 19                       Extinguishing Financial Liabilities with Equity Instruments



                                                                F-37
Apart from the above, in April 2009 the IASB has issued Improvements to IFRSs* which sets out amendments to a number of
IFRSs primarily with a view to removing inconsistencies and clarifying wording. The amendments to IFRS 2, IAS 38, IFRIC
9 and IFRIC 16 which are effective for annual periods beginning on or after 1 July 2009 have been early adopted by the Group
in the current year. The amendments to IFRS 5, IFRS 8, IAS 1, IAS 7, IAS 17, IAS 18, IAS 36 and IAS 39 are effective for
annual periods beginning on or after 1 January 2010 although there are separate transitional provisions for each standard or
interpretation.

1
    Effective for annual periods beginning on or after 1 July 2009
2
    Effective for annual periods beginning on or after 1 January 2010
3
    Effective for annual periods beginning on or after 1 February 2010
4
    Effective for annual periods beginning on or after 1 July 2010
5
    Effective for annual periods beginning on or after 1 January 2011
6
    Effective for annual periods beginning on or after 1 January 2013

*      Improvements to IFRSs contains amendments to IFRS 2, IFRS 5, IFRS 8, IAS 1, IAS 7, IAS 17, IAS 18, IAS 36, IAS 38,
       IAS 39, IFRIC 9 and IFRIC 16.


The Group is in the process of making an assessment of the impact of these new and revised IFRSs and interpretations upon
initial application. Further information about those changes that are expected to significantly affect the Group is as follows:


IFRS 9 issued in November 2009 is the first part of phase 1 of a comprehensive project to entirely replace IAS 39 Financial
Instruments: Recognition and Measurement. This phase focuses on the classification and measurement of financial assets.
Instead of classifying financial assets into four categories in accordance with IAS 39, an entity shall classify financial assets
as subsequently measured at either amortised cost or fair value, on the basis of both the entity’s business model for managing
the financial assets and the contractual cash flow characteristics of the financial assets.


IAS 24 (Revised) clarifies and simplifies the definition of related parties. It also provides for a partial exemption of related
party disclosure to government-related entities for transactions with the same government or entities that are controlled, jointly
controlled or significantly influenced by the same government. The Group expects to adopt IAS 24 (Revised) from 1 January
2011.


6.        NET INTEREST INCOME

                                                                                                      2009             2008

Interest income on:
      Loans and advances to customers (i)
         - Corporate loans and advances . . . . . . . . . . . . . . . . . . . . . . . . . . . .          217,954          234,696
         - Personal loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          48,551           56,869
         - Discounted bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          10,634           15,538
      Financial investments (ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           96,230       102,688
      Due from central banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             23,361           22,634
      Due from banks and other financial institutions. . . . . . . . . . . . . . . . . . . .                  9,148            8,149

                                                                                                         405,878          440,574

Interest expense on:
      Due to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (145,246)        (160,253)
      Due to banks and other financial institutions . . . . . . . . . . . . . . . . . . . . .            (13,021)         (16,043)
      Subordinated bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            (1,790)          (1,241)

                                                                                                        (160,057)        (177,537)

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          245,821          263,037


The above interest income and expense were related to financial instruments which are not at fair value through profit or loss.

(i)       Included in interest income on loans and advances to customers for the year is an amount of RMB1,021 million (2008:
          RMB1,538 million) with respect to the accreted interest on impaired loans.


(ii)      Included in interest income on financial investments for the year is an amount of RMB896 million (2008: RMB1,062
          million) with respect to interest income on impaired debt securities.



                                                                        F-38
7.     NET FEE AND COMMISSION INCOME

                                                                                                     2009                2008

Settlement, clearing business and cash management . . . . . . . . . . . . . . . . . . .                     14,587              13,002
Investment banking business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               12,539               8,028
Personal wealth management and private banking services (i) . . . . . . . . . . . . .                       12,059              10,327
Bank card business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               9,408               7,199
Corporate wealth management services (i) . . . . . . . . . . . . . . . . . . . . . . . .                     4,442               2,788
Guarantee and commitment business . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    2,396               1,849
Assets fiduciary business (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              2,212               2,066
Trust and agency services (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 882                  756
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            517                  696

Fee and commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 59,042              46,711
Fee and commission expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 (3,895)             (2,709)

Net fee and commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 55,147              44,002



(i)    Included in personal wealth management and private banking services, corporate wealth management services, assets
       fiduciary business and trust and agency services above is an amount of RMB6,184 million (2008: RMB5,097 million)
       with respect to trust and other fiduciary activities.


8.     NET TRADING INCOME/(EXPENSE)

                                                                                                     2009                2008

Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             349                1,943
Equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               26                  (14)
Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             (450)                (46)

                                                                                                               (75)              1,883


The above amounts include gains and losses arising from the buying and selling, interest income and expense on and changes
in the fair value of financial assets and liabilities held for trading as well as changes in the fair value relating to the ineffective
portion of the hedging arrangements.


9.     NET LOSS ON FINANCIAL ASSETS AND LIABILITIES DESIGNATED AT FAIR VALUE THROUGH
       PROFIT OR LOSS

                                                                                                     2009                2008

Financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              171                  (55)
Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             (300)               (644)

                                                                                                              (129)               (699)


The above amounts represent gains and losses arising from the buying and selling, interest income and expense on and changes
in the fair value of financial assets and liabilities designated at fair value through profit or loss upon initial recognition.


10.    NET GAIN/(LOSS) ON FINANCIAL INVESTMENTS

                                                                                                     2009                2008

Dividend income from unlisted investments . . . . . . . . . . . . . . . . . . . . . . . .                      96                   69
Dividend income from listed investments . . . . . . . . . . . . . . . . . . . . . . . . .                        5                  13

Dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               101                   82
Gain/(loss) on disposal of available-for-sale financial assets, net . . . . . . . . . . .                    7,238                (449)

                                                                                                             7,339                (367)




                                                                       F-39
11.       OTHER OPERATING INCOME, NET

                                                                                                       2009             2008

Loss from foreign exchange and foreign exchange products, net . . . . . . . . . . .                           (1,246)            (851)
Net gain on disposal of property and equipment, repossessed assets and others . .                              1,122            1,563
Sundry bank charge income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     244              251
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             1,188            1,376

                                                                                                               1,308            2,339



12.       OPERATING EXPENSES

                                                                                                       2009             2008

Staff costs:
      Salaries and bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            38,769           35,169
      Staff benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          11,187           10,846
      Contributions to defined contribution schemes (i) . . . . . . . . . . . . . . . . . .                    6,334            5,237
      Early retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              4,200            2,000

                                                                                                              60,490           53,252

Premises and equipment expenses:
      Depreciation (note 30) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             9,639            8,190
      Minimum lease payments under operating leases in respect of land and buildings.                          2,977            2,469
      Repairs and maintenance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  2,301            2,686
      Utility expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           1,843            1,672

                                                                                                              16,760           15,017

Amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               1,361            1,300
Other administrative expenses (ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  18,076           17,243
Business tax and surcharges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 18,157           18,765
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             5,975            5,758

                                                                                                          120,819          111,335



(i)       Contributions to defined contribution schemes mainly include contributions to the state pension and the Bank’s Annuity
          Plan. During the year and as at the end of the reporting period, the Group’s forfeited contributions available to reduce
          its contributions to the pension schemes in future years were not material.


(ii)      Included in other administrative expenses is auditors’ remuneration (including related assurance services for the Group
          and its subsidiaries and overseas branches) of RMB170 million for the year (2008: RMB181 million).




                                                                         F-40
13.    DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS


Details of the directors’ and supervisors’ emoluments before tax, as disclosed pursuant to the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited and Section 161 of the Hong Kong Companies Ordinance, are as
follows:

                                                                                    Year ended 31 December 2009

                                                                                    Contributions
                                                               Remuneration           to defined                          Total
                                                                paid (before         contribution                      emoluments
Name                                     Position                   tax)               schemes        Fees            before tax (i)

                                                                 RMB’000              RMB’000        RMB’000            RMB’000
                                                                      (1)                (2)           (3)           (4)=(1)+(2)+(3)
JIANG Jianqing . . . . . Chairman of the Board of                            810               101             —                  911
                         Directors, Executive Director
YANG Kaisheng . . . . . Vice Chairman of the Board of                        770               101             —                  871
                        Directors, Executive Director,
                           President
ZHAO Lin . . . . . . . . Chairman of the Board of                            725               101             —                  826
                           Supervisors
ZHANG Furong . . . . . Executive Director, Vice                              666                96             —                  762
                       President
NIU Ximing (ii) . . . . . Former Executive Director, Vice                    673                95             —                  768
                          President
HUAN Huiwu (iii) . . . . Non-executive Director                               —                 —              —                   —
GAO Jianhong . . . . . . Non-executive Director                               —                 —              —                   —
LI Chunxiang (iii) . . . . Non-executive Director                             —                 —              —                   —
LI Jun . . . . . . . . . . . Non-executive Director                           —                 —              —                   —
LI Xiwen . . . . . . . . . Non-executive Director                             —                 —              —                   —
WEI Fusheng (iii) . . . . Non-executive Director                              —                 —              —                   —
FU Zhongjun (ii) . . . . . Former Non-executive Director                      —                 —              —                   —
KANG Xuejun (ii) . . . . Former Non-executive Director                        —                 —              —                   —
SONG Zhigang (ii) . . . Former Non-executive Director                         —                 —              —                   —
Christopher A. COLE            Former Non-executive Director                  —                 —              —                   —
  (ii) . . . . . . . . . . . .
LEUNG Kam Chung,           Independent Non-executive                          —                 —             498                 498
  Antony . . . . . . . . . Director
QIAN Yingyi . . . . . . . Independent Non-executive                           —                 —             485                 485
                          Director
XU Shanda . . . . . . . . Independent Non-executive                           —                 —              —                   —
                          Director
WONG Kwong Shing,         Independent Non-executive                           —                 —             428                 428
 Frank (iv) . . . . . . . Director
M.C. McCarthy (iv) . . . Independent Non-executive                            —                 —              25                  25
                         Director
Kenneth Patrick          Independent Non-executive                            —                 —              25                  25
  CHUNG (iv) . . . . . . Director
WANG Chixi . . . . . . . Shareholder Supervisor                              680                89             —                  769
DONG Juan (v). . . . . . External Supervisor                                  —                 —             175                 175
MENG Yan (v) . . . . . . External Supervisor                                  —                 —             165                 165
WANG Daocheng (vi) . . Former External Supervisor                             —                 —              —                   —
MIAO Gengshu (vi) . . . Former External Supervisor                            —                 —              —                   —
ZHANG Wei (vii) . . . . Employee Supervisor                                   —                 —              50                  50
CHANG Ruiming (vii) . Employee Supervisor                                     —                 —              17                  17

                                                                            4,324              583           1,868            6,775




                                                               F-41
(i)     The total compensation packages for the Chairman of the Board of Directors, President, Chairman of the Board of
        Supervisors, Executive Directors, and Supervisors of the Bank for the year ended 31 December 2009 have not been
        finalized in accordance with the regulations of the PRC relevant authorities. The remuneration not yet accrued is not
        expected to have significant impact on the Group’s and the Bank’s 2009 financial statements. The total compensation
        packages will be further disclosed when determined.


(ii)    Mr. Fu Zhongjun, Mr. Kang Xuejun and Mr. Song Zhigang ceased to act as Directors of the Bank, effective from 17
        February 2009 upon completion of their term; Mr. Christopher A. Cole ceased to act as Director of the Bank, effective
        from 1 June 2009 upon completion of his term; Mr. Niu Ximing ceased to act as Executive Director and Vice President
        of the Bank, effective from 29 December 2009 due to change of his job assignment. The amount included the total
        emoluments before tax for the period of his service as Executive Director and Vice President of the Bank from January
        2009 to December 2009.


(iii)   The appointments of three Non-executive Directors, namely Mr. Huan Huiwu, Ms. Li Chunxiang and Mr. Wei Fusheng,
        were approved by the CBRC on 17 February 2009.


(iv)    The appointment of Mr. Wong Kwong Shing, Frank as Independent Non-executive Director of the Bank, was approved
        by the CBRC on 9 January 2009. At the Second Extraordinary General Meeting for the Year 2009 held on 27 November
        2009, Mr. Malcolm Christopher McCarthy and Mr. Kenneth Patrick Chung were appointed as Independent Non-executive
        Directors of the Bank. The appointments of them were approved by the CBRC on 14 December 2009.


(v)     At the Annual General Meeting for the Year 2008 of the Bank held on 25 May 2009, Ms. Dong Juan and Mr. Meng Yan
        were elected as Supervisors of the Bank, effective from the date of approval at that Annual General Meeting.


(vi)    According to relevant requirements, Mr. Wang Daocheng and Mr. Miao Gengshu ceased to act as Supervisors of the Bank
        effective from 25 May 2009 upon completion of their term, and ceased to hold the position as chief member and member
        of the Supervision Committee of the Board of Supervisors of the Bank, respectively.


(vii)   At the enlarged meeting of the Working Committee of the Bank’s Staff Union held on 4 August 2009, Mr. Zhang Wei
        and Mr. Chang Ruiming were elected as Employee Supervisors of the Bank, and their appointment took effect from the
        date of election. Mr. Zhang Wei was re-elected and re-appointed. The amounts only included fees for their services as
        supervisors.




                                                              F-42
                                                                           Year ended 31 December 2008

                                                                                         Contributions
                                                      Salaries                             to defined                      Total
                                                         and          Discretionary       contribution                  emoluments
Name                             Position            allowances          bonuses            schemes        Fees          before tax

                                                     RMB’000           RMB’000             RMB’000        RMB’000        RMB’000
                                                         (1)               (2)                (3)           (4)         (5)=(1)+(2)
                                                                                                                         +(3)+(4)
JIANG Jianqing . . Chairman of the Board of                    800                658               152            —          1,610
                     Directors, Executive Director
YANG Kaisheng . . Vice Chairman of the Board                   760                643               132            —          1,535
                     of Directors, Executive
                     Director, President
ZHAO Lin . . . . . Chairman of the Board of                    420                345                78            —           843
                   Supervisors
WANG Weiqiang . Former Chairman of the                         360                297                65            —           722
                     Board of Supervisors
ZHANG Furong . . Executive Director, Vice                      680                579               122            —          1,381
                     President
NIU Ximing . . . . Executive Director, Vice                    680                579               122            —          1,381
                     President
FU Zhongjun . . . . Non-executive Director                      —                  —                 —             —               —
KANG Xuejun . . . Non-executive Director                        —                  —                 —             —               —
SONG Zhigang . . Non-executive Director                         —                  —                 —             —               —
GAO Jianhong . . . Non-executive Director                       —                  —                 —             —               —
LI Jun . . . . . . . . Non-executive Director                   —                  —                 —             —               —
LI Xiwen . . . . . . Non-executive Director                     —                  —                 —             —               —
Christopher A.     Non-executive Director                       —                  —                 —             —               —
  COLE . . . . . .
WANG Wenyan . . Former Non-executive                            —                  —                 —             —               —
                     Director
ZHAO Haiying . . Former Non-executive                           —                  —                 —             —               —
                     Director
ZHONG Jian’an . . Former Non-executive                          —                  —                 —             —               —
                  Director
LEUNG Kam         Independent Non-executive                     —                  —                 —            490          490
  Chung, Antony . Director
QIAN Yingyi . . . . Independent Non-executive                   —                  —                 —            470          470
                    Director
XU Shanda . . . . . Independent Non-executive                   —                  —                 —            205          205
                    Director
John L.        Former Independent                               —                  —                 —            398          398
  THORNTON . . Non-executive Director
WANG Chixi . . . . Shareholder Supervisor                      500                390               110            —          1,000
WANG Daocheng . External Supervisor                             —                  —                 —            150          150
MIAO Gengshu . . External Supervisor                            —                  —                 —            140          140
ZHANG Wei . . . . Employee Supervisor                          407                471               114            50         1,042

                                                           4,607                 3,962              895       1,903          11,367


The non-executive directors of the Bank received emoluments from the Bank’s shareholders or its affiliates in respect of their
services during the year.

One of the Bank’s executive directors, who is also a director of a subsidiary of the Bank, waived emoluments amounting to
RMB0.17 million for the year ended 31 December 2009 (2008: RMB0.17 million), which were related to discretionary bonuses
for employees who contributed to the success of operations of the Bank’s subsidiary. Therefore, those emoluments were not
included in the directors’ emoluments disclosed above. Except for above, there was no arrangement under which a director or
a supervisor waived or agreed to waive any remuneration during the year ended 31 December 2009.



                                                               F-43
During the year, no emoluments were paid by the Group to any of the persons who are directors or supervisors as an inducement
to join or upon joining the Group or as compensation for loss of office (2008: Nil).


14.    FIVE HIGHEST PAID INDIVIDUALS


The five highest paid individuals of the Group are employees of the Bank’s overseas subsidiaries. Their emoluments were
determined based on the prevailing market rates in the respective countries/regions where the subsidiaries are operating. None
of them are directors, supervisors or key management personnel of the Bank whose emoluments are disclosed in note 13 or 47(e)
to the financial statements. Details of the emoluments in respect of the five highest paid individuals are as follows:

                                                                                                                       Group

                                                                                                         2009                     2008

                                                                                                        RMB’000                  RMB’000
Salaries and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   14,650                   14,957
Discretionary bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  5,898                    4,146
Contributions to defined contribution schemes . . . . . . . . . . . . . . . . . . . . . .                          897                    5,318

                                                                                                                21,445                   24,421



The number of these individuals whose emoluments fell within the following bands is set out below.

                                                                                                           Number of employees

                                                                                                         2009                     2008

RMB2,500,001 to RMB3,000,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               —                      1
RMB3,000,001 to RMB3,500,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               1                     —
RMB3,500,001 to RMB4,000,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               —                      1
RMB4,000,001 to RMB4,500,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               2                      1
RMB4,500,001 to RMB5,000,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               1                      1
RMB5,000,001 to RMB5,500,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               1                     —
RMB5,500,001 to RMB6,000,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               —                     —
RMB6,000,001 to RMB6,500,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               —                     —
RMB8,500,001 to RMB9,000,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               —                      1
RMB10,000,001 to RMB10,500,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 —                     —

                                                                                                                       5                      5



During the year, no emoluments were paid by the Group to any of these non-director and non-supervisor individuals as an
inducement to join or upon joining the Group or as compensation for loss of office (2008: Nil).


15.    IMPAIRMENT LOSSES ON ASSETS OTHER THAN LOANS AND ADVANCES TO CUSTOMERS

                                                                                           Notes                2009               2008

Charge/(reversal) of impairment losses on:
   Due from banks and other financial institutions . . . . . . . . . . . . .                 21                            (3)             (121)
   Financial investments:
      Held-to-maturity investments . . . . . . . . . . . . . . . . . . . . . . .            27(d)                       136               1,616
      Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . .        27(c)(i),(d)                   781              16,485
   Property and equipment        . . . . . . . . . . . . . . . . . . . . . . . . . . .                                     —                16
   Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                   689                954

                                                                                                                       1,603             18,950




                                                                      F-44
16.       INCOME TAX EXPENSE

(a)       Income Tax

                                                                                                       2009             2008

Current income tax expense:
      PRC
      - Mainland China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            37,663           42,054
      - Hong Kong and Macau . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   599              142
      Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            143               93

                                                                                                              38,405           42,289
Adjustments in respect of current income tax of prior years (i) . . . . . . . . . . . .                        3,765             400

                                                                                                              42,170           42,689
Deferred income tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                (4,272)          (8,539)

                                                                                                              37,898           34,150


(i)       As tax bureau announced a set of regulations in 2009, some of which took into effect from 1 January 2008 retrospectively,
          the Group adjusted the income tax payment for 2008 accordingly.


(b)       Reconciliation between income tax and accounting profit

The PRC income tax has been provided at the statutory rate of 25% in accordance with the relevant tax laws in Mainland China
during the year. Taxes on profits assessable elsewhere have been calculated at the applicable rates of tax prevailing in the
countries/regions in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.
A reconciliation of the income tax expense applicable to profit before tax at the PRC statutory income tax rate to income tax
expense at the Group’s effective income tax rate is as follows:

                                                                                                       2009             2008

Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         167,294          145,376

Tax at the PRC statutory income tax rate . . . . . . . . . . . . . . . . . . . . . . . . .                    41,824           36,344
Effects of different applicable rates of tax prevailing in other countries/regions . .                          (161)            (112)
Non-deductible expenses (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  3,307            2,049
Non-taxable income (ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               (5,271)          (4,335)
Profits and losses attributable to associates and a jointly-controlled entity . . . . .                         (497)            (494)
Adjustments in respect of current and deferred income tax of prior years . . . . . .                          (1,716)            400
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              412              298

Tax expense at the Group’s effective income tax rate . . . . . . . . . . . . . . . . . .                      37,898           34,150


(i)       The non-deductible expenses mainly represent non-deductible impairment provision and write-offs.


(ii)      The non-taxable income mainly represents interest income arising from PRC government bonds, which is exempted from
          income tax.

17.       PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY

The consolidated profit attributable to equity holders of the parent company for the year ended 31 December 2009 includes a
profit of RMB126,638 million (2008: RMB108,959 million) which has been dealt with in the financial statements of the Bank
(note 40).


18.       DIVIDENDS

                                                                                                       2009             2008

Dividends on ordinary shares declared and paid: . . . . . . . . . . . . . . . . . . . .
      Final dividend for 2008: RMB0.165 per share (2007: RMB0.133 per share). . .                             55,113           44,425




                                                                         F-45
                                                                                                   2009                    2008

Dividends on ordinary shares proposed for approval (not recognised
      as at 31 December):
      Final dividend for 2009: RMB0.17 per share (2008: RMB0.165 per share) . . .                         56,783                  55,113



19.       EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY


The calculation of basic and diluted earnings per share is based on the following:

                                                                                                   2009                    2008

Earnings:
      Profit for the year attributable to equity holders of the parent company . . . . .              128,645                 110,841

Shares:
      Weighted average number of ordinary shares in issue (million) . . . . . . . . . .               334,019                 334,019

Basic and diluted earnings per share (RMB yuan) . . . . . . . . . . . . . . . . . . . .                     0.39                    0.33



Basic earnings per share was calculated as profit for the year attributable to ordinary shareholders of the Bank divided by the
weighted average number of ordinary shares in issue. There were no dilutive events during the years ended 31 December 2009
and 31 December 2008.


20.       CASH AND BALANCES WITH CENTRAL BANKS

                                                                          Group                                     Bank

                                                                 2009              2008                   2009              2008

Cash and unrestricted balances with central banks
      Cash on hand . . . . . . . . . . . . . . . . . . . . . .       38,842            40,025                37,993               39,439
      Surplus reserves with the PBOC (i) . . . . . . . . .           85,720           372,544                85,162           372,383
      Unrestricted balances with central banks of
        overseas countries or regions . . . . . . . . . . .             5,167              1,263                 1,085             1,167

                                                                   129,729            413,832               124,240           412,989

Restricted balances with central banks
      Mandatory reserves with the PBOC (ii) . . . . . .           1,441,940         1,190,896             1,441,449          1,190,602
      Fiscal deposits with the PBOC . . . . . . . . . . . .         119,753            87,637               119,753               87,637
      Mandatory reserves with central banks of
        overseas countries or regions(ii) . . . . . . . . .             1,543               576                   549               155
      Other restricted balances with the PBOC (ii) . . .                  83                 83                    83                83

                                                                  1,563,319         1,279,192             1,561,834          1,278,477

                                                                  1,693,048         1,693,024             1,686,074          1,691,466



(i)       Surplus reserves with the PBOC including funds for the purpose of cash settlement and other kinds of unrestricted
          deposits.


(ii)      The Group is required to place mandatory reserve deposits and other restricted deposits with the PBOC and certain
          central banks of overseas countries or regions where it has operations. Mandatory reserve deposits with central banks
          and other restricted deposits are not available for use in the Group’s daily operations. Mandatory reserve deposits mainly
          consist of deposits placed with the PBOC. As at 31 December 2009, the required mandatory deposit reserve ratios set
          by the PBOC in respect of customer deposits denominated in RMB and foreign currencies were 15.5% (2008: 15.5%) and
          5% (2008: 5%), respectively. The amounts of mandatory reserve deposits placed with the central banks of those countries
          or regions outside Mainland China are determined by local jurisdictions.




                                                                 F-46
21.     DUE FROM BANKS AND OTHER FINANCIAL INSTITUTIONS

                                                                                Group                                     Bank

                                                                       2009             2008                2009                  2008

Nostro accounts:
   Banks operating in Mainland China . . . . . . . . .                     135,736             11,092          134,073                   10,089
   Other financial institutions operating in Mainland
       China . . . . . . . . . . . . . . . . . . . . . . . . .                1,177             1,004                858                  1,004
   Banks operating outside Mainland China . . . . . .                       20,516             29,509              18,764                22,201

                                                                           157,429             41,605          153,695                   33,294
Allowance for impairment losses . . . . . . . . . . . .                         (34)              (34)                   (33)               (34)

                                                                           157,395             41,571          153,662                   33,260

Placements with banks and other financial
   institutions:
   Banks operating in Mainland China . . . . . . . . .                      17,508             10,899              19,254                12,528
   Other financial institutions operating in Mainland
       China . . . . . . . . . . . . . . . . . . . . . . . . .              10,174              6,499              10,174                 6,440
   Banks operating outside Mainland China . . . . . .                       50,252            109,429              55,500            102,162

                                                                            77,934            126,827              84,928            121,130
Allowance for impairment losses . . . . . . . . . . . .                         (28)              (35)                   (28)               (33)

                                                                            77,906            126,792              84,900            121,097

                                                                           235,301            168,363          238,562               154,357



Movements of the allowance for impairment losses during the year are as follows:

                                                                                                 Placements with
                                                                                                 banks and other
                                                                                                     financial
Group                                                                       Nostro accounts         institutions                 Total

At 1 January 2008 . . . . . . . . . . . . . . . . . . . . . . . . . .                     34                       156                     190
Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . .                     —                          2                        2
Reversal for the year . . . . . . . . . . . . . . . . . . . . . . . .                     —                    (123)                       (123)

At 31 December 2008 and 1 January 2009 . . . . . . . . . . .                              34                        35                      69
Reversal for the year . . . . . . . . . . . . . . . . . . . . . . . .                     —                         (3)                      (3)
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  —                         (4)                      (4)

At 31 December 2009 . . . . . . . . . . . . . . . . . . . . . . .                         34                        28                      62


                                                                                                 Placements with
                                                                                                 banks and other
                                                                                                     financial
Bank                                                                        Nostro accounts        institutions                  Total

At 1 January 2008 . . . . . . . . . . . . . . . . . . . . . . . . . .                     34                       156                     190
Reversal for the year . . . . . . . . . . . . . . . . . . . . . . . .                     —                    (123)                       (123)

At 31 December 2008 and 1 January 2009 . . . . . . . . . . .                              34                        33                      67
Reversal for the year . . . . . . . . . . . . . . . . . . . . . . . .                     (1)                       (3)                      (4)
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  —                         (2)                      (2)

At 31 December 2009 . . . . . . . . . . . . . . . . . . . . . . .                         33                        28                      61




                                                                      F-47
22.    FINANCIAL ASSETS HELD FOR TRADING

                                                                         Group                                Bank

                                                                2009              2008               2009               2008

Debt securities . . . . . . . . . . . . . . . . . . . . . . .      18,847             32,163             14,241             25,362
Equity investments . . . . . . . . . . . . . . . . . . . . .            129                19                 —                  —

                                                                   18,976             32,182             14,241             25,362

Debt securities analysed into:
   Listed in Hong Kong . . . . . . . . . . . . . . . . . .               81               203                 73                 68
   Listed outside Hong Kong . . . . . . . . . . . . . .                1,152             1,689               168                186
   Unlisted . . . . . . . . . . . . . . . . . . . . . . . . .      17,614             30,271             14,000             25,108

                                                                   18,847             32,163             14,241             25,362



23.    FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

                                                                         Group                                Bank

                                                                2009              2008               2009               2008

Debt securities . . . . . . . . . . . . . . . . . . . . . . .          1,171             1,459               148                144

Debt securities analysed into:
   Listed in Hong Kong . . . . . . . . . . . . . . . . . .              333               301                 —                  —
   Listed outside Hong Kong . . . . . . . . . . . . . .                 675              1,005               148                144
   Unlisted . . . . . . . . . . . . . . . . . . . . . . . . .           163               153                 —                  —

                                                                       1,171             1,459               148                144



24.    DERIVATIVE FINANCIAL INSTRUMENTS


A derivative is a financial instrument, the value of which changes in response to the change in a specified interest rate, financial
instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other similar
variables. The Group uses derivative financial instruments including forwards, swaps and options.


The notional amount of a derivative represents the amount of underlying asset upon which the value of the derivative is based.
It indicates the volume of business transacted by the Group but does not reflect the risk.


The fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable and willing
parties in an arm’s length transaction.




                                                                F-48
At the end of the reporting period, the Group and the Bank had derivative financial instruments as follows:


Group:

                                                                              31 December 2009

                                               Notional amounts with remaining life of                        Fair values

                                                   Over three       Over one
                                      Within        months          year but
                                      three        but within within five          Over five
                                      months        one year         years          years        Total     Assets        Liabilities

Exchange rate contracts:
  Forward and swap contracts .         214,305        247,253             18,413       7,063     487,034      2,827          (3,933)
  Option contracts purchased . .         2,952          1,249               136             —      4,337            30            —
  Option contracts written . . . .       3,029          1,641               137             —      4,807            —            (36)

                                       220,286        250,143             18,686       7,063     496,178      2,857          (3,969)

Interest rate contracts:
  Swap contracts . . . . . . . . .      35,185         36,999         110,244         41,586     224,014      2,526          (3,439)
  Forward contracts . . . . . . . .      3,619          3,415             16,349            —     23,383        221            (222)
  Option contracts purchased . .              —          264                444             —        708             4            —
  Option contracts written . . . .            —          264                444             —        708            —             (4)

                                        38,804         40,942         127,481         41,586     248,813      2,751          (3,665)
Other derivative contracts . . . .        273                  1             34             —        308        150            (139)

                                       259,363        291,086         146,201         48,649     745,299      5,758          (7,773)



Group:

                                                                              31 December 2008

                                               Notional amounts with remaining life of                        Fair values

                                                   Over three       Over one
                                      Within        months          year but
                                       three       but within within five          Over five
                                      months        one year     years              years        Total     Assets        Liabilities

Exchange rate contracts:
  Forward and swap contracts .         242,378        191,333             16,327      11,769     461,807      8,749          (5,721)
  Option contracts purchased . .         2,985          4,437                10             —      7,432        227              (78)
  Option contracts written . . . .       2,868          4,406                10             —      7,284            78         (227)

                                       248,231        200,176             16,347      11,769     476,523      9,054          (6,026)

Interest rate contracts:
  Swap contracts . . . . . . . . .       5,094         22,711         103,525         51,392     182,722      6,543          (7,462)
  Forward contracts . . . . . . . .      3,964          3,759             21,803       1,504      31,030        118            (118)
  Option contracts purchased . .              —            —                264             —        264             5            —
  Option contracts written . . . .            —            —                264             —        264            —             (5)

                                         9,058         26,470         125,856         52,896     214,280      6,666          (7,585)
Other derivative contracts . . . .            27          96                  —             —        123             1            (1)

                                       257,316        226,742         142,203         64,665     690,926     15,721         (13,612)




                                                                   F-49
Bank:

                                                                          31 December 2009

                                               Notional amounts with remaining life of                        Fair values

                                                  Over three    Over one
                                      Within       months       year but
                                      three       but within within five       Over five
                                      months       one year      years          years        Total        Assets       Liabilities

Exchange rate contracts:
  Forward and swap contracts .         202,247       210,523          16,985       8,070     437,825         2,280          (3,507)
  Option contracts written . . . .            —          341              —             —         341              —            (6)

                                       202,247       210,864          16,985       8,070     438,166         2,280          (3,513)

Interest rate contracts:
  Swap contracts . . . . . . . . .      34,813        34,122          97,423      36,879     203,237         2,280          (2,955)
  Forward contracts . . . . . . . .      3,619         3,414          16,273            —     23,306           221           (221)

                                        38,432        37,536      113,696         36,879     226,543         2,501          (3,176)

                                       240,679       248,400      130,681         44,949     664,709         4,781          (6,689)



Bank:

                                                                          31 December 2008

                                               Notional amounts with remaining life of                        Fair values

                                                  Over three    Over one
                                      Within       months       year but
                                       three      but within within five       Over five
                                      months       one year     years           years        Total        Assets       Liabilities

Exchange rate contracts:
  Forward and swap contracts .         226,490       157,180          13,403      11,769     408,842         7,490          (3,877)
  Option contracts purchased . .           481         1,442              —             —       1,923          172              —
  Option contracts written . . . .         481         1,443              —             —       1,924              —         (172)

                                       227,452       160,065          13,403      11,769     412,689         7,662          (4,049)

Interest rate contracts:
  Swap contracts . . . . . . . . .       4,689        17,857          94,166      48,113     164,825         6,211          (6,836)
  Forward contracts . . . . . . . .      3,964         3,759          21,802       1,504      31,029           118           (118)

                                         8,653        21,616      115,968         49,617     195,854         6,329          (6,954)
Other derivative contracts . . . .            —           96              —             —            96            —            —

                                       236,105       181,777      129,371         61,386     608,639        13,991        (11,003)



Cash flow hedges


The Group’s cash flow hedge consists of interest rate swap contracts and currency swap contracts that are used to protect against
exposures to variability of future cash flows arising from floating rate foreign currency denominated assets and floating rate
foreign currency denominated liabilities during the year. The effective portion of the gain or loss on the hedging instrument
is recognised in other comprehensive income, and will be recycled into the profit or loss when the forecast cash flows affect
the income statement. The ineffective portion is immediately recognised in the income statement.




                                                               F-50
Among the above derivative financial instruments, those designated as hedging instruments in the Group’s cash flow hedge are
set out below.

                                                                                 31 December 2009

                                                   Notional amounts with remaining life of                                Fair values

                                                      Over three       Over one
                                         Within         months         year but
                                          three       but within within five          Over five
                                         months        one year          years          years        Total           Assets         Liabilities

Interest rate swap contracts . . .                —               2            654           194         850                   3             (5)


                                                                                 31 December 2008

                                                   Notional amounts with remaining life of                                Fair values

                                                      Over three       Over one
                                         Within         months         year but
                                          three       but within within five          Over five
                                         months        one year     years              years         Total           Assets         Liabilities

Currency swap contracts . . . . .                 —            444               —               —       444                  —             (33)



There is no ineffectiveness recognised in the income statement that arises from cash flow hedges for the current year (2008:
Nil).


Fair value hedges


Fair value hedges are used by the Group to protect it against changes in the fair value of financial assets and financial liabilities
due to movements in market interest rates and exchange rates. Interest rate swaps and currency swaps are used as hedging
instruments to hedge the interest risk and currency risk of financial assets respectively.


The effectiveness of hedges based on changes in fair value of the derivatives and the hedged items attributable to the hedged
risk recognised in the income statement during the year is presented as follows:

                                                                                                      2009                         2008

Gain/(loss) arising from fair value hedges, net:
   - Hedging instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    159                     (529)
   - Hedged items attributable to the hedged risk . . . . . . . . . . . . . . . . . . . .                         (168)                    496

                                                                                                                    (9)                     (33)



Among the above derivative financial instruments, those designated as hedging instruments in fair value hedges are set out
below.


Group:

                                                                                 31 December 2009

                                                   Notional amounts with remaining life of                                Fair values

                                                      Over three Over one
                                         Within         months    year but
                                          three       but within within five          Over five
                                         months        one year     years              years         Total           Assets         Liabilities

Currency swap contracts . . . . .                 —              —               54              —           54               —             (20)
Interest rate swap contracts . . .              635          1,942           13,350        1,900      17,827                  56          (676)

                                                635          1,942           13,404        1,900      17,881                  56          (696)




                                                                      F-51
                                                                                   31 December 2008

                                                    Notional amounts with remaining life of                                       Fair values

                                                       Over three        Over one
                                          Within         months          year but
                                           three       but within within five            Over five
                                          months        one year     years                years            Total           Assets        Liabilities

Currency swap contracts . . . . .                  —              —               124              —           124                  —             (23)
Interest rate swap contracts . . .               312            1,721           9,681        1,191          12,905                   3          (796)

                                                 312            1,721           9,805        1,191          13,029                   3          (819)



Bank:

                                                                                   31 December 2009

                                                    Notional amounts with remaining life of                                       Fair values

                                                       Over three        Over one
                                          Within         months          year but
                                           three       but within within five            Over five
                                          months        one year           years          years            Total           Assets        Liabilities

Currency swap contracts . . . . .                  —              —                54              —               54               —             (20)
Interest rate swap contracts . . .               635            1,942           7,514          446          10,537                  12           (511)

                                                 635            1,942           7,568          446          10,591                  12          (531)


                                                                                   31 December 2008

                                                    Notional amounts with remaining life of                                       Fair values

                                                       Over three        Over one
                                          Within        months           year but
                                           three       but within within five            Over five
                                          months        one year     years                years            Total           Assets        Liabilities

Currency swap contracts . . . . .                  —              —                54              —               54               —             (20)
Interest rate swap contracts . . .               311            1,041           7,693          707           9,752                   3          (546)

                                                 311            1,041           7,747          707           9,806                   3          (566)



The credit risk weighted amounts in respect of the above derivatives of the Group and of the Bank as at the end of the reporting
period are as follows:

                                                                                 Group                                       Bank

                                                                        2009                2008                   2009                  2008

Currency derivatives . . . . . . . . . . . . . . . . . . . .                   4,722               5,900                  3,077                 4,758
Interest rate derivatives . . . . . . . . . . . . . . . . . .                  2,544               6,141                  2,050                 5,804
Other derivatives . . . . . . . . . . . . . . . . . . . . . .                   169                    8                    —                       6

                                                                               7,435           12,049                     5,127              10,568



The credit risk weighted amounts represent the counterparty credit risk associated with derivative transactions and are
calculated with reference to the guidelines issued by the CBRC. The amounts calculated are dependent on, among other factors,
the credit worthiness of the customers and the maturity characteristics of each type of contracts. The amounts differ from the
carrying amount or the maximum exposure to credit risk.




                                                                        F-52
25.     REVERSE REPURCHASE AGREEMENTS

                                                                                 Group                                        Bank

                                                                       2009                2008                 2009                  2008

Analysed by counterparty:
   Banks . . . . . . . . . . . . . . . . . . . . . . . . . . .              356,172            130,061             356,172               130,061
   Other financial institutions . . . . . . . . . . . . . .                  52,654                33,432              52,429                32,131

                                                                            408,826            163,493             408,601               162,192

Analysed by collateral:
   Securities . . . . . . . . . . . . . . . . . . . . . . . . .             348,325            111,466             348,325               111,466
   Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . .             53,266                42,685              53,266                42,685
   Loans . . . . . . . . . . . . . . . . . . . . . . . . . . .                7,235                 9,342               7,010                 8,041

                                                                            408,826            163,493             408,601               162,192


There was no collateral received under certain reverse repurchase agreements by the Group and the Bank which are permitted
to be sold or repledged in the absence of default by the owners of the collateral as at 31 December 2009 and 31 December 2008.


26.     LOANS AND ADVANCES TO CUSTOMERS

                                                                                 Group                                        Bank

                                                                       2009                2008                 2009                  2008

Corporate loans and advances . . . . . . . . . . . . . .                   4,169,259          3,396,633          4,000,066             3,269,141
Personal loans . . . . . . . . . . . . . . . . . . . . . . .               1,229,569           849,045           1,206,850               829,824
Discounted bills . . . . . . . . . . . . . . . . . . . . . .                329,798            326,316             329,792               326,315

                                                                           5,728,626          4,571,994          5,536,708             4,425,280
Allowance for impairment losses . . . . . . . . . . . .                    (145,452)          (135,983)           (144,183)             (135,325)

                                                                           5,583,174          4,436,011          5,392,525             4,289,955


Movements of allowance for impairment losses are as follows:


Group

                                                                               Individually             Collectively
                                                                                 assessed                assessed                    Total
At 1 January 2008 . . . . . . . . . . . . . . . . . . . . . . . . . .                    58,944                  56,743                  115,687
Impairment loss:                                                                         10,955                  25,557                      36,512
  - impairment allowances charged . . . . . . . . . . . . . . .                          25,045                  54,683                      79,728
   - impairment allowances transferred. . . . . . . . . . . . . .                          443                     (443)                         —
   - reversal of impairment allowances. . . . . . . . . . . . . .                      (14,533)                 (28,683)                 (43,216)
Accreted interest on impaired loans (note 6) . . . . . . . . . .                         (1,538)                        —                    (1,538)
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               (11,917)                    (456)                 (12,373)
Recoveries of loans and advances previously written off . . .                                 83                       146                     229
Transfer out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 (2,468)                       (66)                  (2,534)

At 31 December 2008 and 1 January 2009 . . . . . . . . . . .                             54,059                  81,924                  135,983
Impairment loss:                                                                          3,179                  18,503                      21,682
  - impairment allowances charged . . . . . . . . . . . . . . .                          20,056                  61,557                      81,613
   - impairment allowances transferred. . . . . . . . . . . . . .                          242                     (242)                         —
   - reversal of impairment allowances. . . . . . . . . . . . . .                      (17,119)                 (42,812)                 (59,931)
Accreted interest on impaired loans (note 6) . . . . . . . . . .                         (1,021)                        —                    (1,021)
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               (11,259)                    (607)                 (11,866)
Recoveries of loans and advances previously written off . . .                              774                         142                     916
Transfer out . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     (232)                       (10)                    (242)

At 31 December 2009 . . . . . . . . . . . . . . . . . . . . . . .                        45,500                  99,952                  145,452




                                                                      F-53
Transfer out mainly represents impairment allowances of loans transferred into repossessed assets.


Bank

                                                                             Individually           Collectively
                                                                               assessed               assessed            Total

At 1 January 2008 . . . . . . . . . . . . . . . . . . . . . . . . . .                   58,797               56,534           115,331
Impairment loss:                                                                        10,710               25,424               36,134
   - impairment allowances charged . . . . . . . . . . . . . . .                        24,782               54,417               79,199
   - impairment allowances transferred. . . . . . . . . . . . . .                          443                   (443)                —
   - reversal of impairment allowances. . . . . . . . . . . . . .                       (14,515)            (28,550)          (43,065)
Accreted interest on impaired loans . . . . . . . . . . . . . . .                        (1,524)                    —             (1,524)
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                (11,858)                 (446)        (12,304)
Recoveries of loans and advances previously written off . . .                               76                     143              219
Transfer out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 (2,443)                   (88)           (2,531)

At 31 December 2008 and 1 January 2009 . . . . . . . . . . .                            53,758               81,567           135,325
Impairment loss:                                                                          2,803              18,148               20,951
   - impairment allowances charged . . . . . . . . . . . . . . .                        19,614               61,029               80,643
   - impairment allowances transferred. . . . . . . . . . . . . .                          241                   (241)                —
   - reversal of impairment allowances. . . . . . . . . . . . . .                       (17,052)            (42,640)          (59,692)
Accreted interest on impaired loans . . . . . . . . . . . . . . .                        (1,002)                    —             (1,002)
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                (11,102)                 (605)        (11,707)
Recoveries of loans and advances previously written off . . .                              718                     138              856
Transfer out . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    (230)                    (10)             (240)

At 31 December 2009 . . . . . . . . . . . . . . . . . . . . . . .                       44,945               99,238           144,183



Movements of allowance for impairment losses during the year analysed into those attributable to corporate loans and advances
and discounted bills and personal loans and advances are as follows:


Group

                                                                           Corporate loans
                                                                           and discounted
                                                                                bills              Personal loans         Total

At 1 January 2008 . . . . . . . . . . . . . . . . . . . . . . . . . .               102,734                  12,953           115,687
Impairment loss: . . . . . . . . . . . . . . . . . . . . . . . . . . .                  30,639                   5,873            36,512
   - impairment allowances charged . . . . . . . . . . . . . . .                        69,723               10,005               79,728
   - reversal of impairment allowances. . . . . . . . . . . . . .                       (39,084)             (4,132)          (43,216)
Accreted interest on impaired loans (note 6) . . . . . . . . . .                         (1,538)                    —             (1,538)
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                (11,917)                 (456)        (12,373)
Recoveries of loans and advances previously written off . . .                               83                     146              229
Transfer out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 (2,468)                   (66)           (2,534)

At 31 December 2008 and 1 January 2009 . . . . . . . . . . .                        117,533                  18,450           135,983
Impairment loss: . . . . . . . . . . . . . . . . . . . . . . . . . . .                  14,998                   6,684            21,682
   - impairment allowances charged . . . . . . . . . . . . . . .                        69,472               12,141               81,613
   - reversal of impairment allowances. . . . . . . . . . . . . .                       (54,474)             (5,457)          (59,931)
Accreted interest on impaired loans (note 6) . . . . . . . . . .                         (1,021)                    —             (1,021)
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                (11,259)                 (607)        (11,866)
Recoveries of loans and advances previously written off . . .                              774                     142              916
Transfer out . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    (232)                    (10)             (242)

At 31 December 2009 . . . . . . . . . . . . . . . . . . . . . . .                   120,793                  24,659           145,452




                                                                      F-54
Bank

                                                                             Corporate loans
                                                                              and discounted
                                                                                   bills             Personal loans             Total

At 1 January 2008 . . . . . . . . . . . . . . . . . . . . . . . . . .                  102,405                12,926                115,331
Impairment loss: . . . . . . . . . . . . . . . . . . . . . . . . . . .                   30,283                 5,851                   36,134
   - impairment allowances charged . . . . . . . . . . . . . . .                         69,221                 9,978                   79,199
   - reversal of impairment allowances. . . . . . . . . . . . . .                      (38,938)                (4,127)              (43,065)
Accreted interest on impaired loans . . . . . . . . . . . . . . .                        (1,524)                     —                  (1,524)
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               (11,858)                 (446)               (12,304)
Recoveries of loans and advances previously written off . . .                               76                   143                      219
Transfer out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 (2,443)                  (88)                  (2,531)

At 31 December 2008 and 1 January 2009 . . . . . . . . . . .                           116,939                18,386                135,325
Impairment loss: . . . . . . . . . . . . . . . . . . . . . . . . . . .                   14,270                 6,681                   20,951
   - impairment allowances charged . . . . . . . . . . . . . . .                         68,522               12,121                    80,643
   - reversal of impairment allowances. . . . . . . . . . . . . .                      (54,252)                (5,440)              (59,692)
Accreted interest on impaired loans . . . . . . . . . . . . . . .                        (1,002)                     —                  (1,002)
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               (11,102)                 (605)               (11,707)
Recoveries of loans and advances previously written off . . .                              718                   138                      856
Transfer out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   (230)                  (10)                    (240)

At 31 December 2009 . . . . . . . . . . . . . . . . . . . . . . .                      119,593                24,590                144,183


                                                                                 Group                                   Bank

                                                                       2009                2008               2009               2008

Loans and advances for which allowance for
   impairment losses are:       . . . . . . . . . . . . . . . .
   Individually assessed . . . . . . . . . . . . . . . . . .                 78,377               94,811         77,056                 93,936
   Collectively assessed . . . . . . . . . . . . . . . . . .               5,650,249        4,477,183          5,459,652          4,331,344

                                                                           5,728,626        4,571,994          5,536,708          4,425,280

Allowance for impairment losses:
   Individually assessed . . . . . . . . . . . . . . . . .                   45,500              54,059          44,945                 53,758
   Collectively assessed . . . . . . . . . . . . . . . . .                   99,952              81,924          99,238                 81,567

                                                                            145,452            135,983          144,183             135,325

Net loans and advances for which allowance for
  impairment losses are:
   Individually assessed . . . . . . . . . . . . . . . . .                   32,877              40,752           32,111                40,178
   Collectively assessed . . . . . . . . . . . . . . . . .                 5,550,297        4,395,259          5,360,414          4,249,777

                                                                           5,583,174        4,436,011          5,392,525          4,289,955

Identified impaired loans and advances . . . . . . . .                       88,467            104,482           87,085             103,529

Percentage of impaired loans and advances . . . . . .                         1.54%               2.29%           1.57%                 2.34%



Securitisation business


The Group enters into securitisation transactions in the normal course of business by which it transfers credit assets to SPEs
which issue asset-backed securities to investors. The Group may retain interests in the form of subordinated tranches which
would give rise to the Group’s continuing involvement in the transferred assets. Those financial assets are recognised on the
statement of financial position to the extent of the Group’s continuing involvement. The extent of the Group’s continuing
involvement is the extent to which the Group exposes to changes in the value of the transferred assets.




                                                                      F-55
As at 31 December 2009, loans with an original carrying amount of RMB12,032 million (2008: RMB12,032 million) have been
securitised by the Group under arrangements in which the Group retains a continuing involvement in such assets. As at 31
December 2009, the amount of assets that the Group continues to recognise was RMB519 million (2008: RMB519 million), and
the assets were classified as available-for-sale financial assets.


27.      FINANCIAL INVESTMENTS

                                                                                               Group                           Bank

                                                                     Notes              2009           2008             2009          2008

Receivables     . . . . . . . . . . . . . . . . . . . . . . . . .      (a)         1,132,379       1,162,769          1,132,379    1,162,769
Held-to-maturity investments . . . . . . . . . . . . . . .             (b)         1,496,738       1,314,320          1,501,067    1,319,106
Available-for-sale financial assets . . . . . . . . . . . .            (c)              949,909        537,580          918,112       520,576

                                                                                   3,579,026       3,014,669          3,551,558    3,002,451


(a)      Receivables


The receivables are unlisted and stated at amortised cost and comprise the following:

                                                                                                                  Group and Bank

                                                                                           Notes              2009                2008

Huarong bonds       . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (i)                   312,996              312,996
Special government bond         . . . . . . . . . . . . . . . . . . . . . . . . . . .       (ii)                     85,000              85,000
MOF receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (iii)                     62,520            142,773
Special PBOC bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            (iv)                  434,790              434,790
Other bills and bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (v)                   237,073              187,210

                                                                                                                 1,132,379            1,162,769


Notes:


(i)      Huarong bonds are a series of long term bonds issued by China Huarong Asset Management Corporation (“Huarong”)
         in 2000 to 2001 to the Bank, with an aggregate amount of RMB312,996 million. The proceeds from the issuance of the
         bond were used to purchase impaired assets of the Bank. The bonds are non-transferable, with a tenure of 10 years and
         bear interest at a fixed rate of 2.25% per annum. The Ministry of Finance (“MOF”) will provide support for the repayment
         of the principal of the Huarong bonds if necessary. With effect from 1 July 2005, should Huarong be unable to make full
         payment of the bond interest, the MOF will provide funding in support of the payment.


(ii)     The special government bond represents a non-negotiable bond with a nominal value of RMB85,000 million issued by
         the MOF to the Bank in 1998. The bond will mature in 2028 and bears interest at a fixed rate of 2.25% per annum.


(iii)    MOF receivable represents the receivable arising from the disposal of certain impaired assets to Huarong in 2005. The
         amount is repayable before the end of June 2010 and bears interest at a fixed rate of 3% per annum.


(iv)     Special PBOC bills consist of:


         •     a non-transferable bill with a nominal value of RMB430,465 million issued by the PBOC in June 2005, which will
               mature in June 2010 and bears a fixed interest rate of 1.89% per annum. The PBOC has the right to early redeem
               the bill prior to the maturity date; and


         •     a non-transferable bill with a nominal value of RMB4,325 million issued by the PBOC in June 2006, which will
               mature in June 2011 and bears a fixed interest rate of 1.89% per annum. The PBOC has the right to early redeem
               the bill prior to the maturity date.


(v)      Other bills and bonds include PBOC bills as well as government and financial bonds. The balance represents
         non-transferable debt securities with fixed or determinable payments, which will mature in March 2010 to September
         2019 and bears interest rates of 1.76% to 6.30% per annum.



                                                                       F-56
(b)       Held-to-maturity investments


Held-to-maturity investments are stated at amortised cost and comprise the following:

                                                                             Group                            Bank

                                                                    2009             2008           2009             2008
Debt securities . . . . . . . . . . . . . . . . . . . . . . .       1,498,584        1,316,033      1,502,797        1,320,701
Allowance for impairment losses . . . . . . . . . . . .                (1,846)          (1,713)        (1,730)          (1,595)

                                                                    1,496,738        1,314,320      1,501,067        1,319,106


                                                                             Group                            Bank

                                                                    2009             2008           2009             2008
Analysed into:
      Listed in Hong Kong . . . . . . . . . . . . . . . . . .               450              517            133              448
      Listed outside Hong Kong . . . . . . . . . . . . . .            333,552          221,998        331,633          220,832
      Unlisted . . . . . . . . . . . . . . . . . . . . . . . . .    1,162,736        1,091,805      1,169,301        1,097,826

                                                                    1,496,738        1,314,320      1,501,067        1,319,106

Market value of listed debt securities . . . . . . . . .              334,554          234,224        332,377          232,983



(c)       Available-for-sale financial assets


Available-for-sale financial assets comprise the following:

                                                                             Group                            Bank

                                                                    2009             2008           2009             2008
Debt securities, at fair value (i) . . . . . . . . . . . . .          945,425          528,829        915,641          513,238

Equity investments :
      At fair value (i) . . . . . . . . . . . . . . . . . . . . .          2,595            6,861           954             5,541
      At cost (ii):
         Debt for equity swaps . . . . . . . . . . . . . . .               2,015            2,249          2,015            2,249
         Others . . . . . . . . . . . . . . . . . . . . . . . . .           836              412            315              295
         Less: Allowance for impairment losses of
           equity investments . . . . . . . . . . . . . . . .              (962)            (771)          (813)            (747)

                                                                           1,889            1,890          1,517            1,797

Subtotal for equity investments . . . . . . . . . . . . .                  4,484            8,751          2,471            7,338

                                                                      949,909          537,580        918,112          520,576

Debt securities analysed into:
      Listed in Hong Kong . . . . . . . . . . . . . . . . . .              4,380            3,924          2,074            2,075
      Listed outside Hong Kong . . . . . . . . . . . . . .            121,340           94,479        105,866           85,693
      Unlisted . . . . . . . . . . . . . . . . . . . . . . . . .      819,705          430,426        807,701          425,470

                                                                      945,425          528,829        915,641          513,238

Equity investments analysed into:
      Listed in Hong Kong . . . . . . . . . . . . . . . . . .              1,323            1,058            —                —
      Listed outside Hong Kong . . . . . . . . . . . . . .                  271              213            271              213
      Unlisted . . . . . . . . . . . . . . . . . . . . . . . . .           2,890            7,480          2,200            7,125

                                                                           4,484            8,751          2,471            7,338

Market value of listed securities:
      Debt securities . . . . . . . . . . . . . . . . . . . . .       125,720           98,403        107,940           87,768
      Equity investments . . . . . . . . . . . . . . . . . . .             1,594            1,271           271              213

                                                                      127,314           99,674        108,211           87,981




                                                                    F-57
(i)       When impairment of an available-for-sale investment measured at fair value occurs, any impairment loss recognised is
          recorded in the carrying amount directly. As at 31 December 2009, the available-for-sale financial assets measured at fair
          value include debt securities and equity investments which are individually assessed to be impaired whose carrying
          amount is RMB6,280 million (2008: RMB24,565 million) and nil (2008: RMB49 million) respectively, with impairment
          loss recognised in the income statement for the year of RMB590 million (2008: RMB16,162 million).


(ii)      Certain available-for-sale unlisted equity investments which do not have any quoted market prices and whose fair values
          cannot be measured reliably are stated at cost less any impairment losses. There is no active market for these investments
          and it is the Group’s intention to dispose of them as opportunities arise. During the year, the Group disposed of part of
          these equity investments with a carrying value of RMB300 million (2008: RMB881 million). There was no gain or loss
          recognised for such disposal during the year (2008: Nil).


(d)       Movements of allowance for impairment losses of held-to-maturity investments and available-for-sale equity investments
          measured at cost during the year are as follows:

                                                                 Group                                                 Bank

                                                               Available-                                            Available-
                                              Held-to-          for-sale                           Held-to-           for-sale
                                               maturity           equity                            maturity           equity
                                             investments       investments        Total           investments       investments         Total

At 1 January 2008 . . . . . . . . . . .               149              448                597             146                 431               577
Charge for the year . . . . . . . . . .             1,616              323            1,939             1,500                 316             1,816
Disposals . . . . . . . . . . . . . . . .              (52)                —              (52)            (51)                   —              (51)

At 31 December 2008 and
      1 January 2009 . . . . . . . . . . .          1,713              771            2,484             1,595                 747             2,342
Charge for the year . . . . . . . . . .               136              191                327             137                    66             203
Disposals . . . . . . . . . . . . . . . .                (3)               —               (3)                (2)                —               (2)

At 31 December 2009 . . . . . . . . .               1,846              962            2,808             1,730                 813             2,543



28.       INVESTMENTS IN SUBSIDIARIES

                                                                                                                        Bank

                                                                                                         2009                         2008

Unlisted investments, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     15,104                    9,808
Shares listed in Hong Kong, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         11,006                   10,191

                                                                                                                    26,110                   19,999

Market value of the Bank’s investment in a subsidiary whose shares are listed in
  Hong Kong. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      14,204                    6,777




                                                                    F-58
Particulars of the Bank’s principal subsidiaries as at the end of the reporting period are as follows:

                                                                                               Place of
                                             Percentage of equity
                                                                                            incorporation/
                                                 interest directly
                                                                         Nominal value of     registration
                                            attributable to the Bank
                                                                           issued share/          and
Name                                           2009         2008          paid-up capital     operations       Principal activities

                                                %            %
Industrial and Commercial Bank                    72.40       72.04        HK$2,637 million Hong Kong,       Commercial banking
    of China (Asia) Limited                                                                 the PRC
    (“ICBC (Asia)”) (i) . . . . . . .


ICBC International Holdings                           100          100      HK$280 million Hong Kong,        Investment banking
    Limited . . . . . . . . . . . . . .                                                     the PRC


Industrial and Commercial Bank                        100          100     US$26.68 million Almaty,          Commercial banking
    of China (Almaty) Joint Stock                                                           Kazakhstan
    Company . . . . . . . . . . . . . .


Industrial and Commercial East                         75           75        US$20 million British Virgin   Investment banking
   Asia Finance Holdings Limited                                                            Islands and
    (“ICEA”) . . . . . . . . . . . . . .                                                    Hong Kong


Industrial and Commercial Bank                        100          100      US$200 million London,           Commercial banking
   of China, (London) Limited . .                                                          United
                                                                                            Kingdom


ICBC Credit Suisse Asset                               55           55      RMB200 million Beijing, the      Fund management
    Management Co., Ltd. * . . . .                                                          PRC


Industrial and Commercial Bank                        100          100     US$18.50 million Luxembourg       Commercial banking
    of China Luxembourg S.A.          . .


PT. Bank ICBC Indonesia . . . . .                 97.83       97.83      IDR460,000 million Indonesia        Commercial banking


ZAO Industrial and Commercial                         100          100    RUB1,000 million Moscow,           Commercial banking
  Bank of China (Moscow) . . . .                                                           Russia


ICBC Financial Leasing Co., Ltd.                      100          100    RMB5,000 million Tianjin, the      Leasing
  *(ii) . . . . . . . . . . . . . . . . .                                                  PRC


Industrial and Commercial Bank                    89.33       79.93         MOP282 million Macau, the        Commercial banking
   of China (Macau) Limited (iii).                                                         PRC


Industrial and Commercial Bank                        100          100        US$50 million Dubai, United Commercial banking
   of China (Middle East)                                                                   Arab Emirates and investment banking
   Limited . . . . . . . . . . . . . .


Zhejiang Pinghu ICBC Rural                             60           —       RMB200 million Zhejiang, the     Commercial banking
  Bank Co., Ltd. *(iv) . . . . . . .                                                       PRC


Chongqing Bishan ICBC Rural                           100           —       RMB100 million Chongqing,        Commercial banking
  Bank Co., Ltd. *(v) . . . . . . .                                                        the PRC


*   These subsidiaries incorporated in Mainland China are all limited liability companies.




                                                                    F-59
The above table lists the principal subsidiaries of the Bank. To give details of other subsidiaries would, in the opinion of the
management, result in particulars of excessive length.


(i)     During the year, the Bank was allotted 28,612,487 ordinary shares of ICBC (Asia) in lieu of cash pursuant to the scrip
        dividend schemes of ICBC (Asia). Subsequent to the above, the equity interests held by the Bank in ICBC (Asia)
        increased to 72.40%.


(ii)    On 23 September 2009, the Bank made an additional capital injection of RMB3,000 million into ICBC Financial Leasing
        Co., Ltd. and the total registered and paid-in capital increased to RMB5,000 million.


(iii)   Pursuant to the Executive Order No. 30/2009 issued by Chief Executive of the Macau Special Administrative Region of
        PRC on 2 July 2009, the merger of Seng Heng Bank Limited and Macau branch of the Bank has been approved and
        became effective on 11 July 2009. Subsequent to the merger, Seng Heng Bank Limited undertook all the rights and
        obligations of Macau branch’s business operations, and the subsidiary was renamed as “Industrial and Commercial Bank
        of China (Macau) Limited (“ICBC Macau”)” thereafter. The equity interests held by the Bank in ICBC Macau increased
        to 89.33%.


(iv)    Zhejiang Pinghu ICBC Rural Bank Co., Ltd. was established in December 2009, with a registered capital amounting to
        RMB 200 million. The percentage of the equity interests held by the Bank was 60%.


(v)     Chongqing Bishan ICBC Rural Bank Co. Ltd. was established as a wholly-owned subsidiary by the Bank in December
        2009, with a registered capital amounting to RMB 100 million.


Apart from the above, the Bank has consolidated SPEs which are controlled by the Bank.


29.     INVESTMENTS IN ASSOCIATES AND A JOINTLY-CONTROLLED ENTITY

                                                                                                                Group

                                                                                                      2009              2008

Share of net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            17,007            13,191
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           19,271            15,230

                                                                                                             36,278            28,421


                                                                                                                 Bank

                                                                                                      2009              2008

Shares listed outside Hong Kong, at cost . . . . . . . . . . . . . . . . . . . . . . . . .                   33,576            33,160



The following table illustrates the summarised financial information of the Group’s associates and jointly-controlled entity:

                                                                                                      2009              2008

Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,237,895         1,097,073
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (1,145,930)       (1,024,138)

Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           91,965            72,935

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            98,212            61,799
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            11,117            12,202



The financial information above was extracted from the financial statements of the associates and jointly-controlled entity.




                                                                       F-60
Particulars of the Group’s associates and jointly-controlled entity at the end of the reporting period are as follows:

                                                         Percentage of equity
                                                         interest attributable
                                                             to the Group
                                                                                    Place of incorporation
Name                                                       2009          2008             /registration          Principal activities

                                                            %             %
Associates:
Listed investment directly held:
      Standard Bank Group Limited                            20.09         20.07 Johannesburg, Republic        Commercial banking
        (“StandardBank”) (i) . . . . . . . . . . . . .                             of South Africa
Unlisted investment indirectly held:
      China Ping An Insurance (Hong Kong)                         —        18.01 Hong Kong the PRC             General insurance
        Company Limited (ii) . . . . . . . . . . . . .
      IEC Investments Limited (iii) . . . . . . . . .        28.96         28.82 Hong Kong the PRC             Investment company
Jointly-controlled entity:
Unlisted investment indirectly held: . . . . . . .
      Jiangxi Poyanghu Industry Investment                   50.00              — Jiangxi, the PRC             Investment management
        Management Company Limited (iv) . . . .                                                                company


(i)       On 3 April 2009, the Bank was allotted 7,984,815 ordinary shares of Standard Bank pursuant to the scrip dividend
          schemes of Standard Bank. As at 31 December 2009, the equity interests held by the Bank in Standard Bank increased
          to 20.09%.


(ii)      The shareholding of a 25% equity interest in this associate was held through a non-wholly-owned subsidiary, ICBC
          (Asia). The percentage of ownership interest disclosed represents the effective percentage held by the Group. The equity
          investment in this associate was disposed of in December 2009.


(iii)     The shareholding of a 40% equity interest in this associate is held through a non-wholly-owned subsidiary, ICBC (Asia).
          The percentage of equity interest disclosed represents the effective percentage of equity held by the Group.


(iv)      Jiangxi Poyanghu Industry Investment Management Company Limited is a jointly-controlled entity of ICBCI Investment
          Management (Jiangxi) Limited, a wholly-owned subsidiary of ICBC International. The percentage of ownership interest
          disclosed represents the effective percentage held by the Group.

                                                                                                     2009                  2008

Market value of listed investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               29,486                 18,460




                                                                   F-61
30.      PROPERTY AND EQUIPMENT


Group

                                                                                             Office
                                                Properties                                  equipment
                                                  and         Construction   Leasehold         and          Motor
                                                buildings      in progress improvements     computers      vehicles       Total

Cost:
  1 January 2008 . . . . . . . . . . .              74,645          2,667          1,794        21,936          1,760      102,802
  Additions . . . . . . . . . . . . . . .             2,990         5,101          1,090         5,457           227        14,865
  Acquisition of a subsidiary . . . .                  183             —              —               34              1           218
  Transfers . . . . . . . . . . . . . . .             1,759        (2,372)           24           603                 9            23
  Disposals . . . . . . . . . . . . . . .             (510)           (65)           (20)         (704)          (377)      (1,676)

  At 31 December 2008 and
        1 January 2009. . . . . . . . . .           79,067          5,331          2,888        27,326          1,620      116,232
  Additions . . . . . . . . . . . . . .               2,967         7,345          1,141         6,088          1,645       19,186
  Transfers       . . . . . . . . . . . . . .         3,276        (3,755)            11          516                 3            51
  Disposals . . . . . . . . . . . . . . .             (582)          (120)          (112)       (1,346)          (248)      (2,408)

  At 31 December 2009 . . . . . . .                 84,728          8,801          3,928        32,584          3,020      133,061

Accumulated depreciation and
  impairment:
  At 1 January 2008 . . . . . . . . .                 8,709           149           674         11,757          1,247       22,536
  Depreciation charge for the year
        (note 12) . . . . . . . . . . . . .           3,531            —            375          4,075           209         8,190
  Impairment losses . . . . . . . . .                   16             —              —               —               —            16
  Disposals . . . . . . . . . . . . . . .             (252)            (7)           (13)         (684)          (354)      (1,310)

  At 31 December 2008 and
    1 January 2009. . . . . . . . . .               12,004            142          1,036        15,148          1,102       29,432
  Depreciation charge for the year
    (note 12) . . . . . . . . . . . . .               4,170            —            596          4,712           161         9,639
  Disposals . . . . . . . . . . . . . . .             (229)           (34)           (69)       (1,119)          (243)      (1,694)

  At 31 December 2009 . . . . . . .                 15,945            108          1,563        18,741          1,020       37,377

Net carrying amount:
  At 31 December 2008 . . . . . . .                 67,063          5,189          1,852        12,178           518        86,800

  At 31 December 2009 . . . . . . .                 68,783          8,693          2,365        13,843          2,000       95,684




                                                                     F-62
Bank

                                                                                                 Office
                                               Properties                                      equipment
                                                 and         Construction   Leasehold             and            Motor
                                               buildings      in progress improvements         computers        vehicles          Total
Cost:
  1 January 2008 . . . . . . . . . . .             74,548          2,667             1,604            21,789          1,747        102,355
  Additions . . . . . . . . . . . . . . .            2,946         5,101             1,034             5,387               220      14,688
  Transfers . . . . . . . . . . . . . . .            1,759        (2,372)              24               603                  9             23
  Disposals . . . . . . . . . . . . . . .            (501)           (65)              —                (634)          (371)        (1,571)

  At 31 December 2008 and
        1 January 2009 . . . . . . . . .           78,752          5,331             2,662            27,145          1,605        115,495
  Additions . . . . . . . . . . . . . .              2,888         7,345             1,069             6,010               322      17,634
  Transfers      . . . . . . . . . . . . . .         3,276        (3,755)              11               516                  3             51
  Disposals . . . . . . . . . . . . . . .            (582)          (120)              (99)           (1,307)          (245)        (2,353)

  At 31 December 2009 . . . . . . .                84,334          8,801             3,643            32,364          1,685        130,827

Accumulated depreciation and
  impairment:
  At 1 January 2008 . . . . . . . . .                8,704           149              575             11,702          1,239         22,369
  Depreciation charge for the year                   3,516            —               352              4,034               206          8,108
  Impairment losses . . . . . . . . .                  16             —                —                  —                 —              16
  Disposals . . . . . . . . . . . . . . .            (245)            (7)              —                (618)          (348)        (1,218)

  At 31 December 2008 and
        1 January 2009 . . . . . . . . .           11,991            142              927             15,118          1,097         29,275
  Depreciation charge for the year .                 4,152            —               565              4,662               158          9,537
  Disposals . . . . . . . . . . . . . . .            (229)           (34)              (67)           (1,091)          (242)        (1,663)

  At 31 December 2009 . . . . . . .                15,914            108             1,425            18,689          1,013         37,149

Net carrying amount:
  At 31 December 2008 . . . . . . .                66,761          5,189             1,735            12,027               508      86,220

  At 31 December 2009 . . . . . . .                68,420          8,693             2,218            13,675               672      93,678



The Group’s and the Bank’s properties and buildings are held under the following lease terms:

                                                                             Group                                    Bank

                                                                    2009              2008                  2009                 2008

Long term leases (over 50 years)
  Held in the PRC (other than Hong Kong) . . . . .                         5,893              6,186                5,893                6,186
  Held in Hong Kong . . . . . . . . . . . . . . . . . .                     189                185                  178                   185
  Held overseas . . . . . . . . . . . . . . . . . . . . . .                  11                 11                   —                     —

                                                                           6,093              6,382                6,071                6,371

Medium term leases (10 to 50 years)
  Held in the PRC (other than Hong Kong) . . . . .                     59,295               58,216              59,152              58,135
  Held in Hong Kong . . . . . . . . . . . . . . . . . .                      95                 97                   44                    46
  Held overseas . . . . . . . . . . . . . . . . . . . . . .                 101                 85                   40                    41

                                                                       59,491               58,398              59,236              58,222

Short term leases (less than 10 years)
  Held in the PRC (other than Hong Kong) . . . . .                         3,124              2,270                3,113                2,168
  Held in Hong Kong . . . . . . . . . . . . . . . . . .                      75                 13                   —                     —

                                                                           3,199              2,283                3,113                2,168

                                                                       68,783               67,063              68,420              66,761




                                                                    F-63
As at 31 December 2009, the process of obtaining the titleship for the Group’s properties and buildings with an aggregate net
carrying value of RMB6,350 million (2008: RMB5,601 million) was still in progress. Management is of the view that the
aforesaid matter would not affect the rights of the Group to these assets nor have any significant impact on the business
operation of the Group.


31.     DEFERRED INCOME TAX

(a)     Analysed by nature

Group

                                                                     At 31 December 2009                     At 31 December 2008

                                                                                                          Deductible/         Deferred
                                                                  Deductible          Deferred             (taxable)         income tax
                                                                  temporary          income tax           temporary              assets
                                                                  differences           assets            differences        /(liabilities)
Deferred income tax assets:
Allowance for impairment losses . . . . . . . . . . . .                  49,253              12,290              47,709              11,903
Changes in fair value of available-for-sale financial
   assets . . . . . . . . . . . . . . . . . . . . . . . . . . .           3,020                  776            (11,668)              (2,925)
Changes in fair value of financial instruments at
   fair value through profit or loss . . . . . . . . . . .                1,472                  368             (4,096)                (991)
Accrued staff costs . . . . . . . . . . . . . . . . . . . .              20,510               5,127              10,355                2,589
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . .                573                135                   755               170

                                                                         74,828              18,696              43,055              10,746


                                                                     At 31 December 2009                     At 31 December 2008

                                                                   Taxable/           Deferred
                                                                  (deductible)       income tax             Taxable           Deferred
                                                                   temporary          liabilities/        temporary          income tax
                                                                   differences          (assets)          differences         liabilities
Deferred income tax liabilities:
Allowance for impairment losses . . . . . . . . . . . .                     (266)                (43)                   —                   —
Changes in fair value of available-for-sale financial
  assets . . . . . . . . . . . . . . . . . . . . . . . . . . .            1,121                  185                    —                   —
Changes in fair value of financial instruments at
  fair value through profit or loss . . . . . . . . . . .                     220                    36                 —                   —
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   3                   —                 136                  16

                                                                          1,078                  178                   136                  16


Bank

                                                                     At 31 December 2009                     At 31 December 2008

                                                                                                          Deductible/          Deferred
                                                                  Deductible          Deferred             (taxable)         income tax
                                                                  temporary          income tax           temporary              assets
                                                                  differences           assets            differences        /(liabilities)
Deferred income tax assets:
Allowance for impairment losses . . . . . . . . . . . .                  49,072              12,267              47,443              11,859
Changes in fair value of available-for-sale financial
  assets . . . . . . . . . . . . . . . . . . . . . . . . . . .            3,020                  776            (12,183)              (3,027)
Changes in fair value of financial instruments at
  fair value through profit or loss . . . . . . . . . . .                 1,472                  368             (3,963)                (991)
Accrued staff costs . . . . . . . . . . . . . . . . . . . .              20,510               5,127              10,355                2,589
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . .                386                    97                708               177

                                                                         74,460              18,635              42,360              10,607




                                                                     F-64
(b)     Movements of deferred income tax


Group


Deferred income tax assets

                                                                                    Credited/            Credited
                                                                     At             (debited)            to other             At
                                                                  1 January         to income          comprehensive      31 December
                                                                     2009           statement             income              2009

Allowance for impairment losses . . . . . . . . . . . .                   11,903             387                     —             12,290
Changes in fair value of available-for-sale financial
   assets . . . . . . . . . . . . . . . . . . . . . . . . . . .           (2,925)                —             3,701                 776
Changes in fair value of financial instruments at
   fair value through profit or loss . . . . . . . . . . .                  (991)          1,359                     —               368
Accrued staff costs . . . . . . . . . . . . . . . . . . . .                2,589           2,538                     —              5,127
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . .              170                 (35)                 —               135

                                                                          10,746           4,249               3,701               18,696


                                                                                    Credited/            Credited
                                                                     At             (debited)            to other             At
                                                                  1 January         to income          comprehensive      31 December
                                                                     2008           statement             income              2008

Allowance for impairment losses . . . . . . . . . . . .                    4,671           7,232                     —             11,903
Changes in fair value of available-for-sale financial
  assets . . . . . . . . . . . . . . . . . . . . . . . . . . .              695                  —             (3,620)             (2,925)
Changes in fair value of financial instruments at
   fair value through profit or loss . . . . . . . . . . .                (3,179)          2,188                     —               (991)
Accrued staff costs . . . . . . . . . . . . . . . . . . . .                3,125            (536)                    —              2,589
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . .              521             (351)                    —               170

                                                                           5,833           8,533               (3,620)             10,746



Deferred income tax liabilities

                                                                                    Credited/            Credited
                                                                      At             (debited)            to other             At
                                                                  1 January         to income          comprehensive      31 December
                                                                     2009           statement              income             2009

Allowance for impairment losses . . . . . . . . . . . .                       —                 (43)                 —                (43)
Changes in fair value of available-for-sale financial
  assets . . . . . . . . . . . . . . . . . . . . . . . . . . .                —                  —                  185              185
Changes in fair value of financial instruments at
  fair value through profit or loss . . . . . . . . . . .                     —                  36                  —                36
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . .                16                (16)                 —                 —

                                                                              16                (23)                185              178




                                                                    F-65
                                                                                    Credited/            Credited
                                                                     At             (debited)            to other              At
                                                                  1 January         to income          comprehensive       31 December
                                                                     2008           statement             income               2008

Allowance for impairment losses . . . . . . . . . . . .                      (13)                13                  —                  —
Changes in fair value of available-for-sale financial
   assets . . . . . . . . . . . . . . . . . . . . . . . . . . .             315                  —                 (315)                —
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . .                35                (19)                 —                 16

                                                                            337                  (6)               (315)               16



Bank


Deferred income tax assets

                                                                                    Credited/            Credited
                                                                     At             (debited)            to other              At
                                                                  1 January         to income          comprehensive       31 December
                                                                     2009           statement             income               2009

Allowance for impairment losses . . . . . . . . . . . .                   11,859             408                     —              12,267
Changes in fair value of available-for-sale financial
   assets . . . . . . . . . . . . . . . . . . . . . . . . . . .           (3,027)                —             3,803                  776
Changes in fair value of financial instruments at
   fair value through profit or loss . . . . . . . . . . .                  (991)          1,359                     —                368
Accrued staff costs . . . . . . . . . . . . . . . . . . . .                2,589           2,538                     —               5,127
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . .              177                 (80)                 —                 97

                                                                          10,607           4,225               3,803                18,635


                                                                                    Credited/            Credited
                                                                      At             (debited)            to other              At
                                                                  1 January         to income          comprehensive       31 December
                                                                    2008            statement             income              2008

Allowance for impairment losses . . . . . . . . . . . .                    4,671           7,188                     —              11,859
Changes in fair value of available-for-sale financial
  assets . . . . . . . . . . . . . . . . . . . . . . . . . . .              695                  —             (3,722)              (3,027)
Changes in fair value of financial instruments at
  fair value through profit or loss . . . . . . . . . . .                 (3,179)          2,188                     —                (991)
Accrued staff costs . . . . . . . . . . . . . . . . . . . .                3,125            (536)                    —               2,589
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . .              499             (322)                    —                177

                                                                           5,811           8,518               (3,722)              10,607



The Group and the Bank did not have significant unrecognized deferred income tax assets and liabilities at the end of the
reporting period.




                                                                    F-66
32.      OTHER ASSETS

                                                                              Group                                     Bank

                                                                    2009                   2008               2009                  2008

Interest receivable . . . . . . . . . . . . . . . . . . . . .              55,124               52,584           54,441                51,232
Land use rights . . . . . . . . . . . . . . . . . . . . . .                22,672               23,037           22,672                23,037
Settlement accounts . . . . . . . . . . . . . . . . . . . .                 6,030                 8,202              5,039                 6,201
Goodwill (i) . . . . . . . . . . . . . . . . . . . . . . . . .              5,350                 4,891                —                     —
Precious metal . . . . . . . . . . . . . . . . . . . . . . .                2,699                 2,819              2,699                 2,819
Repossessed assets . . . . . . . . . . . . . . . . . . . . .                1,954                 2,206              1,952                 2,204
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . .             15,286               12,518               9,860             10,768

                                                                          109,115              106,257           96,663                96,261


(i)      Goodwill arising from business combinations has been allocated to the Group’s CGU, which is not larger than the
         reportable segment of the Group, for impairment testing.

The recoverable amount of the CGU is determined based on the discounted future cash flows of the CGU. The cash flow
projections based on financial forecasts approved by management of the subsidiaries cover a three to five year period. Cash
flows beyond the three to five year period are extrapolated using the estimate rates which do not exceed the long term average
growth rate for the business in which the CGU operates. The discount rate is the pre-tax rate and reflects the specific risk
associated with the CGU.

As indicated by the impairment test, goodwill arising from business combinations are not impaired and thus, no impairment loss
is recognised.

33.      FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

                                                                                           Group                             Bank

                                                                  Notes             2009            2008             2009            2008

Structured deposits. . . . . . . . . . . . . . . . . . . . . .     (i)              14,581            2,551          14,581           2,285
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . .    (ii)                    —          2,629                 —               —
Certificates of deposit . . . . . . . . . . . . . . . . . . .     (iii)              1,250            2,386                 —               —

                                                                                    15,831            7,566          14,581           2,285


Notes:

(i)      The fair value of structured deposits as at 31 December 2009 was RMB1.63 million which was less than the amount that
         the Group would be contractually required to pay to the holders of these structured deposits upon maturity (2008:
         RMB5.79 million below).

(ii)     All the notes issued in September 2004 by ICBCA (C.I.) Limited, an indirectly-held subsidiary of the Bank, at a coupon
         rate of 4.125% per annum matured on 16 September 2009.

(iii)    The certificates of deposit are all issued by ICBC (Asia) to financial institutions and retail customers at fixed or floating
         rates and are classified as financial liabilities designated at fair value through profit or loss. The fair value of the
         certificates of deposit in excess of the amount that the Group would be contractually required to pay to the holders of
         these certificates of deposit upon maturity as at 31 December 2009 was RMB12.30 million (2008: RMB33.17 million
         above).

There were no significant changes in the credit spread of the Bank and ICBC (Asia) and therefore the amounts of changes in
fair value of the financial liabilities that were attributable to changes in credit risk were considered not significant during the
years presented and cumulatively as at 31 December 2009 and 31 December 2008. The changes in fair value of the financial
liabilities were mainly attributable to changes in other market factors.

Certain structured deposits, notes payable and certificates of deposit have been matched with derivatives as part of a
documented risk management strategy to mitigate market risk, such as interest rate risk. An accounting mismatch would arise
if these financial liabilities were accounted for at amortised cost, because the related derivatives are measured at fair value with
movements in the fair value taken through the income statement. By designating these financial liabilities at fair value through
profit or loss, the movement in their fair values is recorded in the income statement.



                                                                   F-67
34.    DUE TO BANKS AND OTHER FINANCIAL INSTITUTIONS

                                                                            Group                         Bank

                                                                   2009             2008           2009          2008

Deposits
   Banks and other financial institutions operating
     in Mainland China . . . . . . . . . . . . . . . . .             920,315          591,930        920,911       590,841
   Banks and other financial institutions operating
      outside Mainland China . . . . . . . . . . . . . .              10,695                677       10,254            1,258

                                                                     931,010          592,607        931,165       592,099

Money market takings
   Banks and other financial institutions operating
     in Mainland China . . . . . . . . . . . . . . . . .              35,544           40,209         14,488        21,153
   Banks and other financial institutions operating
      outside Mainland China . . . . . . . . . . . . . .              35,080           13,438         36,109        19,508

                                                                      70,624           53,647         50,597        40,661

                                                                   1,001,634          646,254        981,762       632,760



35.    REPURCHASE AGREEMENTS

                                                                            Group                         Bank

                                                                   2009             2008           2009          2008

Analysed by counterparty:
   Banks . . . . . . . . . . . . . . . . . . . . . . . . . . .        36,060               4,648      34,280            4,246

Analysed by collateral:
   Securities . . . . . . . . . . . . . . . . . . . . . . . . .       34,280                200       34,280             200
   Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . .            —              3,841          —             3,841
   Loans . . . . . . . . . . . . . . . . . . . . . . . . . . .            1,780             607           —              205

                                                                      36,060               4,648      34,280            4,246



36.    DUE TO CUSTOMERS

                                                                            Group                         Bank

                                                                   2009             2008           2009          2008

Demand deposits:
   Corporate customers . . . . . . . . . . . . . . . . . .         3,195,842        2,575,763      3,164,652     2,558,776
   Personal customers . . . . . . . . . . . . . . . . . . .        1,827,851        1,444,430      1,808,352     1,432,430
Time deposits:
   Corporate customers . . . . . . . . . . . . . . . . . .         1,736,118        1,482,438      1,628,355     1,390,127
   Personal customers . . . . . . . . . . . . . . . . . . .        2,874,646        2,604,785      2,852,632     2,580,372
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . .       136,820          116,030        136,778       116,027

                                                                   9,771,277        8,223,446      9,590,769     8,077,732




                                                                   F-68
37.      SUBORDINATED BONDS


As approved by the PBOC and the CBRC, the Bank issued callable subordinated bonds with total amount of RMB75,000 million
through open market bidding in 2005 and 2009 respectively, these subordinated bonds were traded in the bond market among
banks. The Bank has not had any defaults of principal or interest or other breaches with respect to the subordinated bonds during
the year (2008: None). The relevant information on these subordinated bonds is set out below:

                                                                                    Maturity      Circulation      Issue
Name                     Issue date    Issue price Coupon rate Value date             date           date         amount       Notes

05 ICBC 01 Bond .         19 August       RMB100            3.11%      29 August     29 August              30   RMB13,000      (i)
                                2005                                        2005           2015     September        million
                                                                                                         2005


05 ICBC 02 Bond .         19 August       RMB100            3.77% 6 September 6 September          11 October    RMB13,000      (ii)
                                2005                                        2005           2020          2005        million


05 ICBC 03 Bond .         19 August       RMB100         Base rate            14            14     11 October     RMB9,000     (iii)
                              2005                        +1.05%       September     September          2005        million
                                                                            2005           2015


09 ICBC 01 Bond . 16 July 2009            RMB100            3.28% 20 July 2009 20 July 2019         20 August    RMB10,500     (iv)
                                                                                                        2009        million


09 ICBC 02 Bond . 16 July 2009            RMB100            4.00% 20 July 2009 20 July 2024         20 August    RMB24,000      (v)
                                                                                                        2009        million


09 ICBC 03 Bond . 16 July 2009            RMB100         Base rate 20 July 2009 20 July 2019        20 August     RMB5,500     (vi)
                                                          +0.58%                                        2009        million


Notes:


(i)      The Bank has the option to redeem all or part of the bonds at face value on 29 August 2010. If the Bank does not exercise
         this option, the annual coupon rate will increase by 300 basis points (“bps”) thereafter.


(ii)     The Bank has the option to redeem all or part of the bonds at face value on 6 September 2015. If the Bank does not
         exercise this option, the annual coupon rate will increase by 300 bps thereafter.


(iii)    The base rate is determined based on the weighted average of the PRC inter-bank money market 7-day repo rates in the
         last 10 trading days prior to its coupon payment date. The Bank has the option to redeem all or part of the bonds at face
         value on 14 September 2010. If the Bank does not exercise this option, the interest rate of the bonds will increase by
         100 bps thereafter.


(iv)     The Bank has the option to redeem all or part of the bonds at face value on 20 July 2014. If the Bank does not exercise
         this option, the annual coupon rate will increase by 300 bps thereafter.


(v)      The Bank has the option to redeem all or part of the bonds at face value on 20 July 2019. If the Bank does not exercise
         this option, the annual coupon rate will increase by 300 bps thereafter.


(vi)     The base rate for the bonds is the one-year lump-sum deposit and withdrawal time deposit rate published by the PBOC
         which is applicable on the date of issue or the first value date in each interest-bearing year. The spread in the first five
         interest-bearing years (i.e., initial spread) is 0.58%. The Bank has the option to redeem all or part of the bonds at face
         value on 20 July 2014. If the Bank does not exercise this option, the interest margin will increase by 300 bps thereafter.




                                                                F-69
38.       OTHER LIABILITIES

                                                                                 Group                                Bank

                                                                      2009                 2008             2009               2008

Interest payable. . . . . . . . . . . . . . . . . . . . . . .             86,221               90,252          85,740             89,606
Settlement accounts . . . . . . . . . . . . . . . . . . . .               38,856               37,295          37,895             35,476
Early retirement benefits . . . . . . . . . . . . . . . . .               10,229               10,355          10,229             10,355
Salaries, bonuses, allowances and subsidies
      payables(i)   . . . . . . . . . . . . . . . . . . . . . . .            9,976                8,252            9,743              8,110
Sundry tax payables . . . . . . . . . . . . . . . . . . . .                  6,395                7,117            6,344              7,093
Bank drafts . . . . . . . . . . . . . . . . . . . . . . . . .                4,242                4,415            3,990              4,392
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . .            18,744               19,432          17,190             18,462

                                                                         174,663              177,118         171,131            173,494


(i)       Salaries, bonuses, allowances and subsidies payables were scheduled to be paid before 30 June 2010.


39.       SHARE CAPITAL

                                                                        31 December 2009                      31 December 2008

                                                                    Number of                             Number of
                                                                     shares          Nominal value         shares          Nominal value

                                                                    (millions)           (millions)
Registered, issued and fully paid:
      H shares of RMB1 each . . . . . . . . . . . . . . . .               83,057               83,057          83,057             83,057
      A shares of RMB1 each . . . . . . . . . . . . . . . .              250,962              250,962         250,962            250,962

                                                                         334,019              334,019         334,019            334,019



Except for the dividends for H shares which are payable in Hong Kong dollars (“HK$”), all of the H shares and A shares rank
pari passu with each other in respect of dividends.


Share appreciation rights plan


The Bank’s share appreciation rights plan was approved in 2006, which allows share appreciation rights to be granted to eligible
participants including directors, supervisors, senior management and other key personnel designated by the board of directors.
The share appreciation rights will be granted and exercised based on the price of the Bank’s H shares and will be valid for 10
years. As at the approval date of these financial statements, no share appreciation rights have been granted.


40.       RESERVES


(a)       Capital reserve


Capital reserve mainly includes share premium arising from the issuance of new shares at prices in excess of par value.


(b)       Surplus reserves


(i)       Statutory surplus reserve


The Bank is required to appropriate 10% of its profit for the year determined under generally accepted accounting principles
in the PRC (“PRC GAAP”) to the statutory surplus reserve until the reserve balance reaches 50% of its registered capital.


Subject to the approval of the shareholders, the statutory surplus reserve may be used to offset accumulated losses of the Bank,
if any, and may also be converted into capital of the Bank, provided that the balance of the statutory surplus reserve after such
capitalisation is not less than 25% of the registered capital immediately before capitalisation.



                                                                      F-70
Pursuant to the resolution of the board of directors’ meeting held on 25 March 2010, an appropriation of 10% of the profit for
the year determined under PRC GAAP to the statutory surplus reserve, in the amount of RMB12,775 million (2008: RMB11,052
million) was approved.


(ii)    Discretionary surplus reserve


After making the appropriation to the statutory surplus reserve, the Bank may also appropriate its profit for the year determined
under PRC GAAP to the discretionary surplus reserve upon approval by the shareholders in general meeting. Subject to the
approval by the shareholders, the discretionary surplus reserve may be used to offset accumulated losses of the Bank, if any,
and may be converted into capital.


(iii)   Other surplus reserve


The Bank’s overseas entities appropriate their profits to the surplus reserves in accordance with the relevant regulations
promulgated by the local regulatory bodies.


(c)     General reserve


The Bank is required to maintain a general reserve within equity, through the appropriation of profit, which should not be less
than 1% of the year end balance of its risk assets.


The Bank’s subsidiaries appropriate their profits to the general reserve according to the applicable local regulations.


Pursuant to the resolution of the board of directors’ meeting held on 25 March 2010, an appropriation to the general reserve
amounting to RMB14,813 million (2008:RMB 28,374 million) was approved. The general reserve balance of the Bank as at 31
December 2009 amounted to RMB83,988 million, which has reached 1% of the year end balance of the Bank’s risk assets.


(d)     Investment revaluation reserve


The investment revaluation reserve records the fair value changes of available-for-sale financial assets.


(e)     Foreign currency translation reserve


The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of the subsidiaries and branches incorporated outside Mainland China.


(f)     Cash flow hedge reserve


The cash flow hedge reserve comprises the portion of the gain or loss on a hedging instrument in a cash flow hedge that is
determined to be an effective hedge.


(g)     Other reserves


Other reserves represent reserves of subsidiaries and share of reserves of associates and a jointly-controlled entity other than
the items listed above.


(h)     Distributable profits


The Bank’s distributable profit is based on the retained profits of the Bank as determined under PRC GAAP and IFRSs,
whichever is lower. The amount that the Bank’s subsidiaries can legally distribute is determined by reference to their profits
as reflected in their financial statements prepared in accordance with the accounting regulations and principles promulgated by
the local regulatory bodies of the respective countries/regions. These profits may differ from those dealt with in these financial
statements, which are prepared in accordance with IFRSs.




                                                              F-71
The movements in reserves and retained profits of the Bank during the year are set out below.

                                                                                Reserves

                                                                                       Foreign
                                                                          Investment currency Cash flow
                                          Capital   Surplus    General revaluation translation      hedge                  Retained
                                          reserve   reserves   reserve   reserve     reserve       reserve     Total        profits

Balance as at 1 January 2008 . .          105,019     13,533     40,801      (2,406)        (81)        —      156,866       45,134
Profit for the year . . . . . . . . .          —          —          —          —            —          —              —    108,959
Net change in fair value of
   available-for-sale financial
   assets . . . . . . . . . . . . . . .        —          —          —        8,644          —          —        8,644           —
Reserve realised on
  disposal/impairment of
   available-for-sale financial
   assets . . . . . . . . . . . . . . .        —          —          —        2,612          —          —        2,612           —
Net loss on cash flow hedges . .               —          —          —          —            —       (4,080)    (4,080)          —
Foreign currency translation . . .             —          —          —          —          (246)        —         (246)          —
Dividend — 2007 final (note
  18). . . . . . . . . . . . . . . . .         —          —          —          —            —          —              —    (44,425)
Appropriation to surplus
  reserves (note). . . . . . . . . .           —      11,061         —          —            —          —       11,061      (11,061)
Appropriation to general
  reserve . . . . . . . . . . . . . .          —          —      28,374         —            —          —       28,374      (28,374)

Balance as at 31 December 2008
  and 1 January 2009. . . . . . .         105,019     24,594     69,175       8,850        (327)     (4,080)   203,231       70,233
Profit for the year . . . . . . . . .          —          —          —          —            —          —              —    126,638
Net change in fair value of
  available-for-sale financial
   assets . . . . . . . . . . . . . . .        —          —          —       (9,170)         —          —       (9,170)          —
Reserve realised on
   disposal/impairment of
   available-for-sale financial
   assets . . . . . . . . . . . . . . .        —          —          —       (1,382)         —          —       (1,382)          —
Foreign currency translation . . .             —          —          —          —           92          —          92            —
Dividend - 2008 final (note 18) .              —          —          —          —            —          —              —    (55,113)
Appropriation to surplus
  reserves (note). . . . . . . . . .           —      12,804         —          —            —          —       12,804      (12,804)
Appropriation to general
  reserve . . . . . . . . . . . . . .          —          —      14,813         —            —          —       14,813      (14,813)
Others . . . . . . . . . . . . . . . .        550         —          —          —            —          —         550            —

Balance as at 31 December
  2009. . . . . . . . . . . . . . . .     105,569     37,398     83,988      (1,702)       (235)     (4,080)   220,938      114,141



Note: Includes the appropriation made by overseas branches in the amount of RMB29 million (2008: RMB9 million).




                                                                 F-72
41.    COMPONENTS OF OTHER COMPREHENSIVE INCOME

                                                                                                              2009                       2008

Available-for-sale financial assets:                                                                             (10,461)                        9,067
   Changes in fair value recorded in other comprehensive income/(loss)
   Less: Income tax effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         3,516                     (3,305)
               Transfer to income statement arising from disposal/impairment . . . .                                 (1,945)                     3,429

                                                                                                                     (8,890)                     9,191

Cash flow hedges:
   Losses arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               (2)                 (4,073)
   Less: Income tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              —                       —
   Transfer to income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 (7)                     —

                                                                                                                            (9)                 (4,073)

Share of other comprehensive income/(loss) of associates and a jointly-controlled
   entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  (1,155)                      500
   Less: Income tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              —                       —
   Transfer to income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 —                       —

                                                                                                                     (1,155)                      500

Foreign currency translation differences . . . . . . . . . . . . . . . . . . . . . . . . . .                          7,531                     (8,604)
   Less: Transfer to income statement . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 —                       —

                                                                                                                      7,531                     (8,604)

                                                                                                                     (2,523)                    (2,986)


42.    NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS


Cash and cash equivalents are as follows:

                                                                                          Note                2009                       2008


Cash on hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         20                        38,842                     40,025
Balances with central banks other than restricted deposits . . . . . . . .                 20                        90,887                 373,807
Nostro accounts with banks and other financial institutions with
  original maturity of three months or less . . . . . . . . . . . . . . . . .                                        89,878                     36,906
Placements with banks and other financial institutions with original
   maturity of three months or less . . . . . . . . . . . . . . . . . . . . . .                                      56,985                 115,584
Reverse repurchase agreements with original maturity of three months
  or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              132,802                        40,969

                                                                                                                 409,394                    607,291


43.    COMMITMENTS AND CONTINGENT LIABILITIES


(a)    Capital commitments


At the end of the reporting period, the Group and the Bank had capital commitments as follows:

                                                                                  Group                                           Bank

                                                                        2009                  2008                   2009                 2008

Authorised, but not contracted for . . . . . . . . . . .                       4,177                  1,687                 4,177                1,687
Contracted, but not provided for . . . . . . . . . . . .                       6,125                  1,658                 5,135                1,644

                                                                             10,302                   3,345                 9,312                3,331




                                                                       F-73
As at 31 December 2009, the Bank had commitments in relation to the transfer and acquisition of shares for the purpose of
acquiring subsidiaries amounted to RMB4,262 million approximately, amongst which RMB3,025 million and RMB1,237
million approximately were included in the amounts of authorised, but not contracted for and contracted, but not provided for
commitments as shown above respectively. Please refer to note 51(a) and note 51(b) for details.


(b)       Operating lease commitments


At the end of the reporting period, the Group and the Bank leased certain of its premises under operating lease arrangements.
The total future minimum lease payments in respect of non-cancellable operating leases are as follows:

                                                                            Group                            Bank

                                                                   2009             2008           2009             2008

Within one year . . . . . . . . . . . . . . . . . . . . . .               2,570            2,146          2,274            1,858
After one year but not more than five years . . . . .                     6,022            5,178          5,382            4,415
After five years. . . . . . . . . . . . . . . . . . . . . . .             1,616            1,658          1,604            1,599

                                                                      10,208               8,982          9,260            7,872


(c)       Credit commitments


At any given time, the Group has outstanding commitments to extend credit. These commitments are in the form of approved
loans and credit card limits.


The Group provides letters of credit and financial guarantees to guarantee the performance of customers to third parties.


Bank acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers. The Group expects most
acceptances to be settled simultaneously with the reimbursement from the customers.


The contractual amounts of credit commitments by category are set out below. The amounts disclosed in respect of loan
commitments and undrawn credit card limit are under the assumption that the amounts will be fully advanced. The amounts for
bank acceptances, letters of credit and guarantees represent the maximum potential losses that would be recognised at the end
of the reporting period had the counterparties failed to perform as contracted.

                                                                            Group                            Bank

                                                                   2009             2008           2009             2008

Bank acceptances . . . . . . . . . . . . . . . . . . . . .           209,967          206,632        209,514          206,236
Guarantees issued . . . . . . . . . . . . . . . . . . . . .          210,243          217,071        205,899          210,408
      Financing letters of guarantees . . . . . . . . . . . .         78,643           87,176         77,348            86,297
      Non-financing letters of guarantees . . . . . . . . .          131,600          129,895        128,551           124,111
Usance letters of credit . . . . . . . . . . . . . . . . . .         113,416           73,374        111,761            71,316
Sight letters of credit . . . . . . . . . . . . . . . . . . .         50,019           39,879         48,201            38,926
Loan commitments . . . . . . . . . . . . . . . . . . . . .           457,956          238,687        368,486          163,710
      With original maturity of not more than one
        year . . . . . . . . . . . . . . . . . . . . . . . . . .     216,253          144,585        149,770          109,512
      With original maturity of more than one year . . .             241,703           94,102        218,716            54,198
Undrawn credit card limit . . . . . . . . . . . . . . . .            198,086          160,830        197,696          160,500

                                                                   1,239,687          936,473      1,141,557          851,096


                                                                            Group                            Bank

                                                                   2009             2008           2009             2008

Credit risk weighted amount of credit commitments                    507,149          385,049        494,460          373,720


The credit risk weighted amount refers to the amount computed in accordance with the rules promulgated by the CBRC. The
risk weights are determined in accordance with the credit status of the counterparties, the maturity profile and other factors.
The risk weights ranged from 0% to 100% for credit commitments.



                                                                   F-74
(d)    Legal proceedings


There were a number of legal proceedings outstanding against the Bank and/or its subsidiaries as at the end of the reporting
period.

                                                                                                      Group and Bank

                                                                                                   2009              2008

Claimed amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           2,131             3,292



In the opinion of management, the Group and the Bank have made adequate allowance for any probable losses based on the
current facts and circumstances, and the ultimate outcome of these lawsuits will not have a material impact on the financial
position or operations of the Group and the Bank.


(e)    Redemption commitments of government bonds


As an underwriting agent of the Government, the Bank underwrites certain PRC government bonds and sells the bonds to the
general public, in which the Bank is obliged to redeem these bonds at the discretion of the holders at any time prior to maturity.
The redemption price for the bonds is based on the nominal value of the bonds plus any interest accrued up to the redemption
date. As at 31 December 2009, the Bank had underwritten and sold bonds with an accumulated amount of RMB149,506 million
(2008: RMB151,345 million) to the general public, and these government bonds have not yet matured nor been redeemed.
Management expects that the amount of redemption of these government bonds through the Bank prior to maturity will not be
material.


The MOF will not provide funding for the early redemption of these government bonds on a back-to-back basis but is obliged
to repay the principal and the respective interest upon maturity.


(f)    Underwriting obligations


At the end of the reporting period, the amount of unexpired securities underwriting obligations was as follows:

                                                                                                      Group and Bank

                                                                                                   2009              2008

Underwriting obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            1,800             1,000



44.    DESIGNATED FUNDS AND LOANS

                                                                                                      Group and Bank

                                                                                                   2009              2008

Designated funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      280,805            237,432

Designated loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      280,080            236,755



The designated loans represent the loans granted to specific borrowers designated by the trustors on their behalf according to
the entrust agreements signed by the Group and the trustors. The Group does not bear any risk.


The designated funds represent the funding that the trustors have instructed the Group to use to make loans to third parties as
designated by them. The credit risk remains with the trustors.


45.    ASSETS PLEDGED AS SECURITY


Financial assets of the Group including securities,